Buy Ellenbarrie Industrial Gases Ltd for the Target Rs 420 by Motilal Oswal Financial Services Ltd
Capturing India’s structural growth in industrial gases
Ellenbarrie Industrial Gases (ELLEN) is one of India’s leading industrial gas manufacturers, supplying oxygen, nitrogen, argon and carbon dioxide to key enduser industries, including steel, healthcare, pharmaceuticals and manufacturing, through on-site and merchant supply models. We believe ELLEN is well positioned to benefit from the structural growth in India’s domestic solar cell manufacturing ecosystem and the expansion of the steel and pharmaceutical industries.
* ELLEN is expanding its presence in high-value solar manufacturing applications through ultra-high-purity gases, with its upcoming central India facility (FY28) set to supply ammonia and nitrous oxide to capitalize on the sector’s growth.
* India’s crude steel capacity is projected to reach 604 MT by CY47, which presents a significant growth opportunity for ELLEN. The recently commercialized 320 TPD on-site plant in East India, backed by a long-term steel supply contract, along with planned capacity expansions, positions the company well to capitalize on rising industrial gas demand.
* Further, India’s growing prominence as a pharmaceutical manufacturing hub, supported by cost competitiveness, supply-chain diversification from China and government initiatives such as PLI schemes and Ayushman Bharat, is expected to drive industrial gas demand, creating growth opportunities for ELLEN.
* We expect ELLEN to clock a CAGR of 40%/36%/26% in revenue/EBITDA/ PAT during FY26-29. We value the company based on 30x Sep’28 EPS. Reiterate BUY with a TP of INR420.
Positioning for growth in India’s solar manufacturing ecosystem
* ELLEN is strengthening its presence in emerging sectors such as solar manufacturing by supplying application-specific gases, including ultrahigh-purity gases (99.9999% purity), while expanding its capabilities to serve higher-value applications.
* India’s solar cell manufacturing industry is poised for further growth, with ALMM-listed solar cell manufacturing capacity reaching ~37.8 GW as of Oct’26. The total capacity is expected to reach to ~56.6 GW in FY27 and ~64.3GW in FY28.
* Domestic solar cell manufacturing will be supported by government initiatives such as the production-linked incentive (PLI) scheme, mandatory sourcing of approved list of models and manufacturers (ALMM), the extension of ALMM requirements to ingots and wafers from Jun’28, and domestic content requirement (DCR) mandates under the PM Surya Ghar, PM-KUSUM and CPSU schemes. These factors will also strengthen local solar supply chain, including locally manufactured industrial gasses, which are one of the key inputs for solar cell.
* Solar cell manufacturing requires ultra-high-purity oxygen, which commands significantly higher realizations than conventional oxygen, nitrogen and argon, along with high-purity ammonia and nitrous oxide.
* To capture the opportunity, ELLEN is installing a new plant in central India, which will be strategically located near a major solar cell manufacturing hub and will supply key industrial gasses for the manufacturing of solar cells. The upcoming facility is expected to be operational by FY28.
Positioned to benefit from long-term steel industry growth
* The steel industry is a key end-market for ELLEN, accounting for ~31% of FY26 revenue. Oxygen is used for decarburization, while argon supports stirring and refining, and nitrogen is used for inerting and oxygen-enrichment applications.
* India's crude steel capacity is expected to increase at a CAGR of 4.9% from 220MT in FY26 to 604MT in FY47. Considering this, ELLEN focuses on expanding its capacity to capture the growing demand from the steel sector. Ellen has recently commercialized its 320 TPD on-site plant in East India with revenue contribution starting from Sep’26, supported by a long-term steel supply contract.
* The ramp-up at the Kurnool and Uluberia 2 merchant plants is progressing well, with continued focus on improving capacity utilization through FY27.
Valuation and view
* ELLEN operates through a diversified portfolio of gases, supported by long-term contracts that ensure stable demand and customer retention. Its balanced business model across bulk, packaged, and onsite supplies contributed 68%, 15%, and 16% of revenue in FY26, respectively.
* Ellen is expected to sustain its growth momentum, aided by the mid- to longterm triggers such as
1) capacity expansion across India, especially In North and Central India to capture the opportunity in these markets
2) development of domestic solar cell manufacturing ecosystem and capturing opportunities in solar cell industry
3) stable demand from well-diversified core industries
4) ramp-up of newly commercialized plants.
* We expect ELLEN to clock a CAGR of 40%/36%/26% in revenue/EBITDA/ PAT during FY26-29. We value the company based on 30x Sep’28 EPS. Reiterate BUY with a TP of INR420.
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