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Margin headwinds on the cards

While we cut our FY27E EPS estimates by 2% to account for RM inflation, we have raised our FY28E EPS estimates by 6% amid healthy traction in creatives and steel bottles. FLAIR IN reported an in-line performance with revenues of INR3,230mn (PLe INR3,297mn) and EBITDA margin of 17.9% (PLe 17.1%). After registering an increase in the band of ~17-20% in the last 5 quarters, top-line growth succumbed to 8.4% in 4QFY26 as export OEM revenue suffered due to ME crisis. Further, as ~35% of the RM basket is crude linked and FLAIR IN just has ~4-5 weeks of additional RM cover, EBITDA margin is likely to remain under pressure in 1QFY27E. Nonetheless, we believe inflationary pressures are transitory and EBITDA margin is expected to recover to 18.3% in FY28E from 16.5% in FY27E. We expect sales/PAT CAGR of 15%/16% over FY26- FY28E and retain BUY on the stock with a TP of INR411 (23x FY28E EPS; no change in target multiple). The stock trades at an attractive valuation of 22x/17x over our FY27E/FY28E EPS estimates (DOMS IN trades at 50x/38x over our FY27E/FY28E EPS estimates) and we believe the recent correction offers a good entry point from a longterm perspective. Maintain BUY.

Revenue increased 8.4% YoY:

Revenue increased 8.4% YoY to INR3,230mn (PLe INR3,297mn) as compared to INR2,980mn in 4QFY25. In 4QFY26, revenue from pens declined 4.1% YoY to INR2,130mn (PLe INR2,349mn). Nonetheless, creative revenue grew by 79.2% YoY to INR860mn (PLe INR549mn) while steel bottle & houseware revenue grew by 83.3% YoY to INR220mn (PLe INR183mn).

EBITDA/PAT up 23.3%/18.4% YoY:

EBITDA grew 23.3% YoY to INR577mn (PLe INR565mn), with a margin of 17.9% (PLe 17.1%) as against a margin of 15.7% in 4QFY25. PAT increased 18.4% YoY to INR365mn (PLe INR334mn) with a margin of 11.3% (PLe 10.1%) against a margin of 10.3% in 4QFY25.

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