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Hidden Gem - ELGI Equipment (CMP: ₹517, MCap: ₹16,319 crore ; Target: ₹620, Upside: 20%)

ICICIdirect Research 13 Feb 2026 DISCLAIMER

Elgi reported a strong consolidated Q3FY26 performance, with revenue rising 18% YoY to ₹1,004 crore, led by strong traction across India, the Middle East and the Americas, while Europe remained subdued due to macro headwinds. EBITDA increased 20.4% YoY to ₹144 crore, with EBITDA margin expanding by 24 bps YoY to 14.3%, reflecting operating leverage. PAT grew 18% YoY to ₹95 crore, supported by broad-based demand, including double-digit growth in the automotive segment.
The US business remains profitable despite tariff headwinds. Q3FY26 saw ~1% EBITDA margin impact from higher US tariffs due to fresh inventory at 50% tariff rates. Price increases of 6–7% implemented earlier have largely mitigated the 50% tariff impact, and with tariff reductions, margin is expected to improve from Q2FY27 once higher-cost inventory is liquidated.
European operations are currently operating at a cost-managed breakeven level. Management is recalibrating the cost structure with the objective of achieving profitability beyond breakeven by FY27. Lower structural costs from next fiscal should support margin recovery in the region.
Company plans to launch low-cost screw compressors (30–40% lower pricing) in H1FY27 to counter Chinese imports while maintaining demand Match technology delivering 6–17% energy efficiency gains strengthen Elgi’s value proposition.
Company is developing new motor technologies to reduce dependence on permanent magnets amid China-related supply risks, with first trial expected in 6–8 months.
India domestic market is expected to deliver low double-digit growth, assuming no major global disruptions. Inquiry levels are improving across segments. Management believes Q4FY26 is likely to be sequentially better than Q3FY26.

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