ESAB India - Muted Topline Growth; Higher Costs Weigh on Margins - Company Update

ESAB India reported a soft Q4FY26 with revenue marginally below estimates amid muted infrastructure activity, while margins were impacted by elevated employee costs. Despite near-term moderation, we remain constructive on the company’s medium-term positioning supported by its premium portfolio, superior profitability and structural tailwinds from industrial capex, energy and shipbuilding. We downgrade the rating to ACCUMULATE from BUY and lower TP to Rs 7,538 (from Rs 7,860 earlier) following the sharp run-up in the share price, while maintaining a positive medium-term outlook. Our estimates imply a revenue/EBITDA/Adjusted PAT CAGR of 12%/17%/18% over FY26–28E. Recommend buy on dips.

Revenue slightly below estimates; margins impacted:

ESAB India reported Q4FY26 revenue of Rs 3,958mn, up 7.6% YoY though 2.4% below estimates amid softer infrastructure demand. EBITDA declined 4.6% YoY to Rs 628mn, while EBITDA margin contracted 202bps YoY to 15.9% due to a sharp 29% YoY rise in employee costs. PAT declined 8.0% YoY to Rs 436mn. For FY26, revenue/EBITDA/PAT grew 9.8%/10.3%/17.8%, respectively. Raw material prices remained firm amid recovery in domestic steel prices, while election-linked labor shortages kept infrastructure activity muted in certain regions. Channel checks indicate 10-15% price hikes in welding consumables during Jan-May 2026.

ESAB continues to retain margin leadership versus peers:

While Ador Welding reported relatively stronger momentum aided by favorable mix and lower base, ESAB India maintained superior profitability with Q4FY26 EBITDA margin of 15.9% versus 10.5% for Ador Welding. Ador’s outperformance was mainly driven by tighter cost control. We believe ESAB India’s premium portfolio, stronger technology access and operating efficiency should sustain its competitive edge.

Structural tailwinds remain favorable:

India’s continued focus on manufacturing, infrastructure and energy investments, along with increasing domestic shipbuilding activity, should support healthy demand growth for welding consumables and automation solutions over the medium term. We believe the government’s focus on naval expansion, commercial vessel manufacturing and domestic shipyard capacity enhancement could emerge as a meaningful growth driver for ESAB India.

Valuation, view and Key risks:

We cut FY27E/FY28E revenue estimates by 5.4%/5.4% and EBITDA/PAT estimates by 10.4%/8.9%, respectively, factoring in softer Q4FY26 execution and higher employee costs. We also lower our TP to Rs 7,538 based on unchanged 45.0x P/E and 30.0x EV/EBITDA on Mar’28E estimates. We downgrade the rating to ACCUMULATE from BUY due to limited near-term upside after the recent stock price run-up, while remaining positive on the company’s medium-term outlook. 

Key risks: (i) economic downturn derailing growth, and (ii) increase in competition affecting product prices and margins.

Company website: https://esab.com/

Click to download the full ESAB India Ltd. Q4FY26 Company Update

Analyst:

• Mohit Surana - Senior Research Analyst, Institutional Equities (NISM-202300189881)

Open your MNCL Demat Account