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New capacity additions to support growth EBITDA below estimate due to higher transport costs; Adj. PAT in line

* Ellenbarrie Industrial Gases (ELLEN) delivered a steady performance in 2QFY27, with EBITDA growing 20% YoY to INR402m on account of capacity ramp-up and increase in realizations marginally offset by a rise in power costs.

* We expect growth momentum to accelerate, driven by the ramp-up of the Uluberia-II facility and the East India on-site plant, alongside the upcoming North and Central India merchant plants, now expected to be operational by 2HFY28. Increasing contribution from argon is expected to provide an additional growth impetus.

* While we broadly maintain our FY27 earnings estimates, we lower our FY28 estimates by 7% to factor in delay in the commercialization of the North India plant (~220 TPD), which is now expected in 2HFY28. We reiterate our BUY rating with a TP of INR400 (based on 30x Sep’28 EPS).

Highlights from the management commentary

* Expansion plans: The ramp up of recently commissioned Uluberia 2 merchant plant (~220 TPD), along with the East India onsite plant (~320 TPD), is expected to drive near-term revenue growth. The next phase of expansion, comprising two merchant plants in North and Central India, is expected to become operational around mid-FY28, with revenue contribution commencing in 2HFY28.

* Argon: Argon’s contribution to the overall gas mix increased to ~16% in 2QFY27 from ~10% in 1QFY27, driven equally by higher volumes and improved realizations, supported by the ramp-up of the Uluberia II facility. Management expects argon contribution to sustain at 14–16%, backed by favorable demand-supply dynamics, with demand outpacing supply

* Outlook: Management reiterated its guidance of ~20% revenue growth in the core gases business, primarily driven by volumes, with higher argon contribution supporting realizations. The company is expanding its geographical presence to strengthen its pan-India footprint and emerge as a pan-India player, while targeting long-term EBITDA margins of ~40% in the gases segment, supported by a higher share of onsite operations and premium gases.

* Project engineering : ELLEN secured a major INR4.8b BHEL contract in Sept’26 for the design, engineering, supply, erection, and commissioning of a 1,200 TPD cryogenic air separation unit in Odisha for coal gasification. The project will be executed over eight quarters, with revenue recognition linked to execution progress. EBITDA margins are expected to remain in high-single-digit to lowdouble-digits

Valuation and view

* ELLEN’s growth story will be led by:

1) capacity expansion across India

2) demand of argon outpacing supply

3) increasing traction in inquiries for onsite plants

4) stable demand from well-diversified core industries

5) India’s manufacturing expansion and accelerating industrial activity

6) increasing demand for oxygen from coal gasification.

* We expect ELLEN to clock a CAGR of 41%/34%/25% in revenue/EBITDA/PAT during FY26-29. While we broadly maintain our FY27 earnings estimates, we lower our FY28 estimates by 7% to factor in delay in the commercialization of the North India plant (~220 TPD), which is now expected in 2HFY28. We reiterate our BUY rating with a TP of INR400 (based on 30x Sep’28 EPS).

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