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Strong execution; input costs weigh on profitability

We revise FY28E/FY29E EPS estimates by -3.3%/-4.9%, factoring in a slower gross margin recovery amid elevated input cost pressures. Ingersoll-Rand India (INGR) reported strong execution in Q2FY27, with revenue growing 23.5% YoY to Rs4.0bn, while EBITDA margin contracted by 235bps YoY to 21.2%, likely due to input cost pressures which weighed on profitability. Demand remained diversified across automotive, metals, engineering, textiles, pharmaceuticals, electronics, infrastructure and food processing. The ongoing ramp-up of the Sanand facility is expected to support incremental volumes over the medium term, while enabling the introduction of new air-treatment and compression solutions. International markets across Asia, the Middle East and Africa offer further export opportunities, supported by India's growing role as a regional manufacturing hub. Within centrifugal compressors, the company is expanding its offering through higher-capacity frames exceeding 10,000 cfm, while continuing to develop oil-free low-pressure solutions for power and infrastructure and contact-cooled rotary technologies for Tier-2 industries. Its focus on OEM/rental offerings and diversified oil-free platforms further broadens its product portfolio. With rotary screw compressor localisation already exceeding 90%, continued localisation should strengthen cost competitiveness. Sustaining execution momentum and managing input cost pressures remain key monitorablew.The stock is currently trading at a PE of 34.0x/29.4x on FY28/29E. We upgrade our rating from ‘Accumulate’ to ‘Buy’ given the recent correction in the stock price. We roll forward to Sep’28E valuing the stock at 40x Sep’28E (42x Mar’28E earlier) arriving at a TP of INR4,993 (INR4,934 earlier).

Long term view:

IR India is well-positioned to capitalize on the growing demand for compressors in India given it is

1) among the top 3 air compressor players in India

2) capacity expansion to 15,000 units which will drive volumes & scale

3) innovation-led product expansion across oil-free low-pressure, contact-cooled rotary and hydrogen compressors, enabling deeper penetration into Tier-2 and emerging industrial markets

4) backed by strong global parentage of Ingersoll Rand Inc (IR Inc.), providing access to cutting-edge R&D and technology.

Higher input costs impact margins:

Revenue increased by 23.5% YoY to INR4.0bn (Ple: INR3.8bn) driven by strong execution. Gross margin contracted by 367bps YoY to 41.1%. (Ple: 43.5%). EBITDA increased by 11.2% YoY to INR843mn (Ple: INR912mn) while EBITDA margin contracted by 235bps YoY to 21.2% (Ple: 24.0%) due to lower gross margin despite operating leverage. PBT (exc. Extra-ordinaries) increased by 8.9% YoY to INR880mn (Ple: INR963mn) despite higher depreciation (+32.5% YoY to Rs47mn). Adj.PAT increased by 9.1% YoY to INR659mn (Ple: INR717mn) despite a slightly lower tax rate of 25.2% (vs. 25.4% in Q2FY26)

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