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EBITDA margin beat due to softening RM prices

* Consolidated revenues grew ~6.1% YoY to INR68.3b (below estimate of INR70b).

* Gross margins grew 50bp YoY (+120bp QoQ) to 45.3% (above estimates of 44.8%) primarily due cooling rubber prices.

* EBITDA grew 16.3% YoY to INR10.2b, beating our estimates of INR9.6b. Consequently, margins also beat our estimates coming in at 14.9%, having grown 130bps YoY. Reduced input costs and lower expenses led to the margin beat.

* However, due to a onetime expense of INR1.8b taken for impairment of assets at their Netherland subsidiary, PAT came in much lower than our estimate at INR2.6b. However, adjusted for this one-time expense, PAT came in at INR3.9b which was broadly in-line with our estimates.

* S/A business revenues was in line with estimates at INR47.1b, growing ~6% YoY (flat QoQ). EBITDA margin grew 220bp YoY to 15.3% beating our estimates of 14% mainly due to lower RM and other costs.

* Derived EU revenues grew 7.1% YoY in INR terms due to favourable currency impact (declined 1.2% in EUR terms). EBITDA margins contracted 300bp YoY to 14.2%. We await details for the EU operations.

* Valuation: The stock trades at 25x/20.4x FY26E/FY27E consolidated EPS.

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