Buy INOX India Ltd For Target Rs. 1,355 By JM Financial Services
Gaining back momentum; maintain BUY
INOX witnessed a slow 9M. However, it regained momentum in 4Q, its PAT rising 48.6% YoY, owing to a strong operating performance (EBITDA +53.4% YoY). For FY26, management has guided for a revenue growth of 18-20%, and an EBITDA margin of 22- 24%. INOX also reported a 25% YoY increase in its order book to INR 13.6bn, which includes several large orders. Further, with the Savli plant now operational for kegs and a cryoshop, INOX should not face any constraints w.r.t capacities. It has also received the longawaited client approvals in its beverage kegs business, which should drive growth in FY26. We factor in a 5-6% increase in our FY26/27E EPS estimates, and maintain BUY with a target price of INR 1,355 at 38x Mar’27E EPS.
* 4Q PAT 12% ahead of estimates: 4Q revenue at INR 3.7bn, +34% YoY, was ~3% lower than estimate of INR 3.8bn. However, a higher than expected gross margin (57.7% vs. 54%), drove a 4% beat on EBITDA. On a YoY basis, EBITDA rose 53% YoY, and margins stood at 22.1%, expanding 280bps, primarily on account of operating leverage benefits. PAT at INR 655mn rose 49% YoY, and was 12% ahead of estimates.
* Order book remains healthy, however, driven majorly by exports: Order book at INR 13.6bn rose 25% YoY (Industrial Gases +7%, LNG +119%, CSD -14%) while order inflow at INR 3.6bn rose 18% YoY. This growth in order book was driven by a 55% growth in exports, which now stands at INR 8.7bn. Through the year, INOX won several large orders including (1) an LNG order in the Bahamas, (2) from the Tata OSAT plant in Assam, (3) LNG stations from Adani Total Gas, (4) from Indian Railways for LNG fuelling systems, amongst others. For the Cryo-Scientific Division, INOX expects a large order in FY26. Besides this, while the beverage kegs business, was undeniably slow in FY25, INOX has now received approvals from AB InBev and is in final stages of approvals from Heineken, which should drive growth in FY26. A significant portion of orders from this are yet to come in. Lastly, with the Savli plant now operational for kegs and a cryoshop, they should not face any constraints w.r.t capacities.
* Guidance of 20% growth intact: For FY25, INOX reported a 15% YoY growth in revenue, owing to a slow 9M. Gross margins for the year stood at 55.8% vs. 56.3% YoY (however, upward trend seen in 4Q at 57.7%), while EBITDA margins stood at 21.8% vs. 22.1% YoY. Absolute EBITDA registered a 14% YoY growth to INR 2.8bn, and FY25 PAT at INR 2.3bn rose 15% YoY. FY25 was slightly slower than initial expectations owing to certain capacity constraints and delays in offtake, challenges w.r.t. export container shortage in 1H, and higher freight costs, which have now normalized. For FY26, management has guided for a revenue growth of 18-20%, with a 22-24% EBITDA margin, and a 15-18% PAT margin.
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SEBI Registration Number is INM000010361
