Esab India Q2 FY27 Results (NSE: ESABINDIA)
Signal: Margin pressure
The read
The key inflection is margin deterioration despite 11.1% YoY revenue growth: EBITDA margin fell 260bps to 16.3% as employee and other expenses rose 18.9%, while the sharp gross-margin expansion to 40.2% was not retained below gross profit; PAT growth of 31.4% therefore overstates the underlying operating trajectory.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹424.03 Cr | +11.1% | +0.7% |
| Net profit | ₹48.94 Cr | +31.4% | |
| EPS | ₹31.8 | +31.4% | |
| EBIT margin | 16.3% |
P&L walk
Revenue grew 11.1% YoY to ₹42,403 lakh, but EBITDA margin fell 260bps to 16.3% as employee and other expenses rose faster than sales; PAT still grew 31.4% to ₹4,894 lakh.
Key positives
- Revenue increased 11.1% YoY to ₹42,403 lakh and was broadly stable sequentially at +0.7%.
- Six-month operating cash flow rose 79.3% YoY to ₹8,826 lakh versus ₹4,922 lakh, materially exceeding six-month PAT of ₹7,920 lakh.
- Gross margin expanded 4,050bps YoY to 40.2% as raw material, stock-in-trade and inventory-change costs fell to 59.8% of revenue from 100.3%.
- EPS grew 31.4% YoY to ₹31.80, tracking PAT without evidence of equity dilution.
Key concerns
- EBITDA margin compressed 260bps YoY to 16.3% and 80bps sequentially as employee benefits expense rose 27.7% YoY and other expenses rose 13.5%.
- PAT declined 12.8% sequentially to ₹4,894 lakh despite revenue increasing 0.7%, indicating weaker operating conversion in Q2.
- Gross-margin expansion was not converted into operating-margin expansion; the filing does not disclose the reason for the unusually large change in material-cost intensity.
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