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Tega industries reported quarterly revenue in line with our estimate. Revenue growth of 26.8% was mainly due to carry forward revenue from 4Q spill over and service business. Equipment business in 1QFY25 declined 18.7% YoY, mainly due to delays from customer end. McNally entered into a contract as a consortium member with NMDC, to execute contract with revenue potential for Tega would be INR 1.2bn (total project cost INR 8.2bn) to be executed in 26 months. Supply chain challenges still persist due to congestion at major ports; however company has taken proactive steps to mitigate the impact, it will also pass on the increase in freight cost to the customers. Planned capex of c. USD 30mn over next couple of years, majorly towards Chile plant and INR 150-200mn towards Equipment business. Management guided for revenue growth of 15% and EBITDA margins in range of 21-22% for FY25.We expect Dynaprime will continue to be key growth driver along with additional revenue coming from McNally’s equipment business.

* Revenue carry forward from 4Q drives growth: Revenue grew 26.8% YoY to INR 3.4bn, 4.5% above JMFe of INR 3.3bn. Consumables segment grew 36% YoY to INR 3bn. Equipment business revenue declined 18.7% YoY and to INR 360mn. EBITDA grew 63% YoY to INR 642mn (JMFe of INR 547mn), with EBITDA margin came in at 18.9% up 420bps YoY (JMFe 16.8%), mainly due to lower other expenses as % of sales 23.7% vs 25.6% YoY and employee cost 16.9% vs 18.3% YoY. On segmental basis- Consumables margins expanded to 21.3% vs 15.8% YoY, while equipment business reported loss of INR 4mn vs profit of INR 309mn YoY. PAT grew 72% YoY to INR 367mn (JMFe of INR 295mn), aided by higher other income up 43% YoY.

* Equipment business impacted during the quarter: Equipment business revenue were impacted, mainly due to delay in receipt of payment, inspection and delay in dispatch clearance certificated from certain customer, which is expected to be covered in 2QFY25 revenues. This resulted in EBITDA loss of INR 4mn in 1Q. Integration exercise is progressing as per plan and company continues to focus on cost control and improving efficiencies. Margin for full year is likely to be 10-11%.

* Started construction at Chile plant: Tega has commenced the construction work at Chile plant and is expected to be completed by Jun’25. Revenue potential from the Chile Plant is c.USD 100mn and will be target to cater to Latin American market.

* Maintain BUY with revised TP of INR 2,010: We remain positive on stock due to a) healthy penetration opportunity for DynaPrime lines, b) cross selling opportunity for equipment (McNally), c) upcoming Chile plant to tap LATAM markets and d) expansion in newer geographies (recently incorporated subsidiary in Peru). We expect revenue and earnings CAGR of 19%/27% over FY24-26E, factoring in 19% revenue CAGR in consumable business and 16% CAGR in equipment business. Maintain BUY rating on stock with revised TP of INR 2,010 based on 43x FY26E (37x FY26E earlier). Key risk: delay in normalisation of supply chain and unable to harness McNally integration benefit.

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SEBI Registration Number is INM000010361