KSB Ltd. - Q1CY26 PAT trails sales; margins bite - Company Update

KSB Ltd Q1CY26 results were a miss to our estimates. The seasonally weak quarter was further impacted by 290bps YoY erosions in EBITDA margin that led to sharper than estimated PAT decline. Our analysis indicates LPG shortage as a possible reason for such a performance, also hinted at by the management in their recent investor interactions. While NPCIL approvals remain on the anvil, considering the Middle East crisis and its possible impact on KSB operations, we have lowered our PAT estimate for CY26E / CY27E by 13.6% / 2.8%, respectively. We have broadly maintained our TP at Rs 942, but following a sharp run up in the stock, we now turn cautious and lower our rating to HOLD (BUY earlier).Recommend buying at dips.

Disproportionate decline in PAT relative to revenue:

Q1CY26 revenue was Rs 6,013mn, +1.0% YoY and -8.2% vs our estimates. The fall in EBITDA was sharper, reaching Rs 508mn, -25.0% YoY and -29.4% vs our estimates. Consequently, PAT fell 22.9% YoY to Rs 398mn. Q1 is usually a seasonally weak quarter in terms of both revenue growth and EBITDA margins but the sharp fall this quarter is likely attributable to LPG shortage which may have led to some order cancellations, delayed production, and increase in costs in projects where costs pass through is a challenge. If the ME crisis deepens, KSB’s operations may continue to be impacted.

Valves segment was most impacted:

Valves segment revenue fell 16% YoY to Rs 1,018mn while pumps segment grew 5% YoY. Reported EBIT for the Valves segment was sharply down 57% YoY to Rs 84 mn. Valves typically require more fabrication than pumps and LPG being a major input in fabrication, the shortage of the same may have contributed to such financial performance for this quarter.

Management commentary in CY25 Annual Report indicated risks from ME crisis:

KSB highlighted in its annual report, released on April 28th, that near term margin pressures may persist ─ “Volatility in raw material prices, particularly metals and castings, continues to exert pressure on margins, especially under fixed-price contracts. In addition, evolving geopolitical developments and supply chain disruptions, including logistics constraints and freight volatility, may impact input availability and cost structures”

Valuation and rating:

Despite cutting our earnings estimate and using an unchanged target multiple of 45x Mar’28e EPS, our TP has not moved much due to valuation rollover. Downgrade to HOLD with TP of Rs 942. Key risks: Continued spillover effects from Middle East crisis, unfavorable domestic capex cycle, and further delay in NPCIL approvals.

Company website: https://www.ksb.com/en-global

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Analyst:

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

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FAQs on KSB Ltd Q4FY26 Company Update

Why did KSB’s Q1CY26 performance weaken?

Margin contraction due to LPG shortages, supply disruptions, and weak performance in the valves segment led to lower profitability.

Which segment was most impacted?

The valves segment saw a sharp decline due to higher dependence on fabrication and input cost pressures.

What are the key factors to watch ahead?

Order inflows, NPCIL approvals, and normalization of supply chain conditions will be critical for recovery.

What risks could impact performance?

Geopolitical tensions, raw material volatility, and delays in project execution could continue to pressure margins.