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Superior value & ex-MENA volumes negate war impact

Usha Martin (USM) delivered strong Q1FY27 results with 44% YoY EBITDA growth, supported by superior product mix, higher NSR, strong volume growth in India, US and Europe negating sharp 28% decline in Middle East volumes. Disciplined cost passthrough despite elevated steel, energy and freight costs aided margins to 20.1%. While the Middle East remained a drag due to geopolitical disruptions and delayed projects, healthy demand across India, Europe and the US more than offsetting the weakness. Domestic rope business remained particularly strong (12% volume growth), led by elevators and mining, while the wire business continued to deliver robust 19% volume growth. USM also achieved an important milestone with its first international Plasticated LRPC order and continued traction in OceanFibre portfolio.

Mgmt. remains confident of sustaining profitable growth in FY27, driven by value-led volume expansion (10-12% vol growth & 15% value), increasing penetration across global OEMs, continued premiumization of its product portfolio and gradual capacity additions in specialized ropes. Healthy demand across India, Europe and the US, improving approvals for Plasticated LRPC, scaling up of niche VASP and benefits from the One Usha Martin initiative are expected to support EBITDA growth over the medium term. While the ME remains subdued (9% revenue share), normalization of geopolitical conditions would remove the drag and provide a meaningful upside across crane, elevator, offshore, marine and infrastructure-related applications once the region starts to rebuild. While the ME remains a key monitorable, any normalization in the region could remove the volume drag and provide meaningful upside. We remain constructive on the stock due to its ability to deliver resilient value performance during uncertain macro scenario. We upgrade our FY28/29E EBITDA estimates by 2.3%/0.8% assuming higher NSR and maintain BUY with revised TP of INR 594 (INR 585 earlier) assigning same 25x PER to Sep’28 EPS.

Strong NSR offsets regional volume weakness:

Consolidated revenue grew 16% YoY to INR10.3bn (+5.5% QoQ; PLe INR10.2bn) aided by higher pricing. Overall sales volumes remained flat YoY to 51kt (-4% QoQ; PLe 52kt) due to an impact of ME conflict. However, demand remains healthy across India, the US and EU, particularly in wire ropes and higher-value applications. Volumes for wire ropes remained flat YoY and QoQ at 26kt, while wire and strand volumes increased 17% YoY to 14kt (-7% QoQ; PLe 14.5kt). LRPC volumes declined 15% YoY and 8% QoQ to 11kt (PLe: 12kt). Blended NSR increased 10% QoQ to INR 202,549/t (PLe INR194,784/t), supported by higher pricing, richer product and geographic mix.

Cost pass-through and richer product mix drive margins:

EBITDA increased 44% YoY to Rs2.1bn(-1.7% QoQ; PLe 2bn), while EBITDA margin stood at 20.1% (PLe 19.5%), which is an improvement of 400bps YoY (-150bps QoQ). Margin expansion was supported by improved product mix, higher NSR, effective cost management and pass through of higher input & freight costs. RM cost per ton increased 12% YoY to Rs102k, employee cost/t increased 8% YoY to Rs24k while other expenses increased 10% YoY to Rs36k/t. Cons. EBITDA/t stood at Rs 40,786 (+44% YoY & 2% QoQ; PLe Rs38k). Cons PAT increased 41% YoY to Rs1.42bn in line with our estimates, supported by strong operating performance and lower interest costs, despite lower other income.

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