Strong volume growth blunted by raw material inflation; margin recovery at risk

Reported revenue ₹4,840.7 Cr, YoY growth 20.7%. Claim aligned with delivered result.

OPM delivered at 6.6%, below both EBITDA margin claims and far below 10-11% full-year guidance. Sequential margin improvement real but insufficient.

Q2 OPM at 6.6%; management expects 4-5% further RM inflation in Q3. Stabilization not occurring, recovery highly unlikely.

7% pricing in Q2 + 4-5% planned for Q3 insufficient; RM costs up 9% QoQ, 22% vs Q1FY27. Margin still compressing.

Guided 10-11% OPM for FY27 in Q1; Q2 delivered 6.6%, Q1 was 6.8%. H2 recovery to 11-13% now unachievable. Implicit downward revision to ~7-8% full year.

Prior ₹4,980 Cr multi-year plan now revised to ₹1,300 Cr for FY27 alone (₹800 Cr done, ₹500 Cr remaining). Significant moderation.

RM costs up 22% since Q1; expected to inflate 4-5% further in Q3. No stabilization visible despite prior H2 margin recovery assumption.

Domestic volumes +22% YoY; OEM +25%, replacement +20%. EV volumes surged 24% QoQ. OE-market driven growth broadening across TBR, PLR, 2/3W segments.

Yes, evaluating India-U.K. trade tariff agreement. Developing Europe-specific SKUs and already supplying parts via exports. Will take advantage of FTA and ramp up.

RM costs up 9% QoQ, 22% since Q1. Crude oil-linked costs (carbon black, synthetic rubber, steel cord) all up on Y-o-Y and Q-o-Q basis. Expected 4-5% further increase in Q3. Pricing increases already delivered 7% QoQ, with 4-5% more planned NSR in Q3-Q4. Unabsorbed delta continues to pressure margins.

Consolidated other expenses increased ~INR100 Cr QoQ. In standalone, RM basket increased 270 basis points. At consolidated level, margin broadly flat. Manufacturing in India for Mexico exports; customer billing done from Mexico subsidiary.

Remaining capex ~INR500 Cr for balance period. Volume growth on capex is ~1:1 asset turn; 1:1 can be considered for future revenues.

Seeing some traction from farm sector; rural income saw positive offshoots but also deficit in some agriculture sectors. Mixed signals. Supply ready for OEMs at large; no major demand disruption expected.

Unabsorbed cost from RM increase and lag in pricing pass-through. Delta unabsorbed. Some basic points in Q3 for margin improvement; focused on cost efficiencies and utilization. Demand healthy, competitive pricing challenge in replacement market.

Replacement market healthy growth momentum. Category-wise: truck/bus ~56%, PLR ~28%, 2-wheeler/3-wheeler ~6%, non-truck bias ~10% of standalone revenue. High single digit coming in medium-term TBR outlook.

H1 revenue ₹4,026 Cr + ₹4,841 Cr = ₹8,867 Cr. On pace for double-digit FY27 growth vs ₹40,000+ Cr base (estimate).

Q2 delivered 6.6% OPM (Q1 was 6.8%). RM inflation expected 4-5% further in Q3. Margin recovery unachievable without RM deflation or step-function pricing (unlikely). Implicit downgrade to 7-8% FY27.

Multi-year guidance was ₹4,980 Cr adding 7% capacity by FY28, 24% by 2029. FY27 spend revised down significantly; indicates deferrals or margin-driven constraints.

RM costs (crude oil, carbon black, synthetic rubber, steel cord) up 22% since Q1 and 9% QoQ in Q2. Management expects 4-5% further increase in Q3. Unabsorbed cost delta is eroding margins despite volume growth.

Guided OPM of 10-11% for FY27 now at severe risk. Q2 delivered only 6.6% (Q1: 6.8%). H2 margin recovery to 11-13% unachievable given 4-5% expected RM inflation. Full-year OPM likely 7-8% or lower.

West Asia conflict ongoing; freight, shipping costs remain elevated. Supply chain constraints persist. Crude oil prices volatile. If escalation spreads, input costs and demand could face further headwinds.

Multi-year capex guidance ₹4,980 Cr (to add 7% capacity by FY28, 24% by 2029) now appearing at risk. FY27 spend revised to ₹1,300 Cr (₹800 Cr done, ₹500 Cr remaining), a significant moderation. Margin pressure may force further deferrals.

Replacement market is highly competitive; pricing pass-through is capped. OEM market (indexed) easier to pass through. If RM costs continue to rise but replacement market pricing caps out, margins will compress further.