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KPR Mill reported consol. EBITDA of INR2.9bn, lower than JMfe of INR3.4bn primarily driven by miss in revenue. Revenue miss of ~9% was driven weak sugar segment performance (down 22% YoY). Despite the top-line pressure, gross margins expanded meaningfully to 44.2% (+290 bps YoY), supported by favourable raw material costs. Consequently, EBITDA margin improved by 30bps YoY to 20.1% in 3QFY26 depicting better cost control and easing input pressures. Garment segment performance remained flattish YoY with volumes up ~8% YoY and NSR down ~7% YoY. We await the formal announcement for capacity expansion in the garment and fabric segment. In our understanding, capacity expansion of ~25% each in garment and fabrics is expected over the next 2 years with an expected capex of ~INR4bn on each project. This is expected to drive volume and earnings growth over the next few years. KPR, being the industry leader, has a proven track record and will be a key beneficiary to the recently announced BTAs / FTAs, in our view. We value the company at 32x P/E multiple for FY28E, implying a TP of INR1,215/sh (upside of ~34%). Maintain BUY.

? Top-line compress given weak Sugar performance: Consolidated revenue for the quarter came in at INR14.7bn down 4% YoY led by weakness in the sugar segment performance. Textile revenues were relatively resilient (-2% YoY), while sugar saw a sharp 22% YoY decline. Despite the top-line pressure, gross margins expanded meaningfully to 44.2% (+290 bps YoY), supported by favourable raw material costs. KPR Mill reported consol. EBITDA of INR2.9bn, down ~3% YoY driven by higher staff costs (+14% YoY), with margins at 20.1% (+30 bps YoY). EBITDA compression YoY was primarily operating leverage-led, given lower revenues, though sequential improvement in EBITDA margin reflects better cost control and easing input pressures. In the near-term, capacity expansion by ~25% in the garment and fabric segments (each with ~INR4bn capex) is expected to drive volume and earnings growth over the next few years.

? Lower NSR partially offset higher volumes in Textile segment: Revenue for Garment segment came in at ~INR 7bn, up 1% YoY and down 2% QoQ. While garment sales volumes jumped 8% YoY and 13% QoQ to 44mn pieces, net sales realization (NSR) declined by 7% YoY and 16% QoQ to INR 157/piece (calculated). Yarn & fabric sales volumes increased by 6% YoY and 4% QoQ to 19.3k tonnes but was offset by a similar decline in NSR (-6% YoY and -4% QoQ) to INR 251/kg (calculated) leading to flattish revenue (both YoY and QoQ). Textiles EBIT declined 5% YoY and 9% QoQ to Rs 2.2bn. EBIT margin declined by 117bps YoY and 122bps QoQ.

? Weak Sugar segment performance driven by lower volumes: Revenue for the Sugar segment came in at INR840mn, down sharply by ~50% YoY and down 54% QoQ. This was led by a significant 54% YoY and 53% QoQ decline in volumes to 21.9k tonnes. NSR was higher 7% YoY but declined by 2% QoQ to INR 38.4/kg. Ethanol revenue increased by 9% YoY while it decreased by 33% QoQ to INR 1.04bn, with 11% YoY rise in volumes while volumes declined by 39% QoQ at 16.0mn litres. NSR declined 2% YoY while it increased by 10% QoQ at INR 65.1/litre. Segment EBIT (Sugar + Ethanol) increased by 11% % YoY to INR 209mn. EBIT margin expanded sharply by 282bps YoY to 9.5%.

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