RHI Magnesita India Ltd. - Tough quarter; Price hikes to the rescue - Company Update

RHIM’s 4QFY26 performance was below our estimates due to weaker than expected offtake and higher than expected operating expenses, driven by elevated RM (Magnesia), high freight cost and INR depreciation. The market share gains in steel & iron making and new 4PRO contracts are sustainable and should aid growth in upcoming quarters. Traction in coke oven projects is likely to ensure revenue visibility in FY27E. Additionally, selective price hikes implemented in 1QFY27 and more expected in the ongoing quarter are expected to enhance value growth in FY27E. However, the loss of market share in cement segment, price cutting and cut-throat competition in steel segment due to massive overcapacity, is likely to impact profitability going ahead. This is the reason for the 10.8%/ 10.2% cut in FY27E/ FY28E estimates respectively. Further, we have downgraded our valuation multiple and now value RHIM at average of 15x Mar’28E EV/EBITDA (previously 17x) and 28x Mar’28E PER (previously 30x) to arrive at a TP of Rs 500/share (previously Rs 580). However, we maintain BUY rating due to sharp correction in share price (attractive valuations).

Value growth offset weak offtake:

RHIM reported 2% yoy growth in consolidated revenues at Rs 9.3bn in 4QFY26 (miss to our estimates) impacted by a 6% yoy decline in offtake, more than offset by 8% jump in realization. Dispatches were weak due to weak demand and loss of market share in the cement business and high competition in steel business. For FY26, revenue grew by 9.4% yoy to Rs 40.2bn.

Weak margins due to input cost inflation:

RHIM reported a 66bps yoy; decline in consol. margins at 9.5% for 4QFY26, impacted by high Magnesia cost, elevated freight cost & INR depreciation leading to high operational expenses. This translated into 5% yoy decline in consol. EBITDA at Rs 882mn. Adj. PAT grew by 8% yoy to Rs 390mn (adjusted for impairment at Dalmia assets). For FY26, Adj. EBITDA declined by 6% yoy to Rs 4.5bn, translating into margins of 11.2%, -180bps yoy. Adj. PAT declined by 11% yoy to Rs 1.8bn.

Price hikes and market share gains to aid performance:

The market share gains in steel & iron making and new 4PRO contracts are sustainable and should aid growth in upcoming quarters. Traction in coke oven projects has improved substantially with new projects signed, ensuring solid revenue visibility for 18 months. Additionally, selective price hikes implemented in 1QFY27 and more expected in the ongoing quarter are expected to enhance value growth in FY27E. This, along with benefits of internal cost control, new product localization (tap hole clay) and recycling of RM, should result in cost savings. The release of working capital due to tighter inventory and lower receivables has led to a net cash balance sheet as of Mar’26, ensuring future capex through internal accruals. However, the loss of market share in cement segment, price cutting and cut-throat competition in steel segment due to massive overcapacity, is likely to impact profitability going ahead. This is the reason for the 10.8%/ 10.2% cut in FY27E/ FY28E estimates respectively.

Valuation and rating:

We value RHIM at average of 15x Mar’28E EV/EBITDA (previously 17x) and 28x Mar’28E PER (previously 30x) to arrive at a TP of Rs 500/share (previously Rs 580). The downgrade in valuation multiple is to account for the lower profitability (margins) outlook due to overcapacity in the industry. However, we maintain BUY rating due to sharp correction in share price (attractive valuations). Downward revision in TP is mainly due to cut in earnings and valuation multiple. Key risks: Over-capacity and price cutting in domestic market, poor demand from cement industry.

Company website: https://www.rhimagnesitaindia.com/

*CMP is as per report published date

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Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on RHI Magnesita India Ltd Q4FY26 Company Update

These FAQs highlight key takeaways from MNCL’s institutional equity research on RHI Magnesita India, covering performance trends, growth drivers and risk factors relevant for long-term investors.

1. What impacted RHI Magnesita India's Q4FY26 performance?

The quarter was affected by weaker offtake, elevated magnesia costs, higher freight expenses, currency depreciation, and increased operating costs, resulting in lower-than-expected profitability.

2. What are the key growth drivers for RHI Magnesita India?

Key growth drivers include market share gains in steel and iron making, expansion of 4PRO contracts, traction in coke oven projects, selective price hikes, product localization, and recycling initiatives.

3. How are price hikes expected to support future performance?

Selective price increases implemented in FY27 are expected to improve realizations, support value growth, and partially offset rising input and logistics costs.

4. What industries contribute significantly to RHI Magnesita India's business?

The company primarily serves steel, cement, iron making, and industrial manufacturing sectors through its refractory products and technical solutions.

5. What are the key risks for the company?

Major risks include industry overcapacity, aggressive price competition, weaker demand from the cement sector, raw material cost inflation, and sustained margin pressure.

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