Elgi Equipments Ltd’s (ELEQ) 4QFY25 revenues rose 15 percent year-on-year (YoY) to INR 9.9 billion, 9 percent ahead of consensus estimates (EE). Growth was driven by a strong overseas performance (+18 percent YoY) on broad-based traction across geographical regions and a healthy 9 percent YoY increase in India compressor revenues. EBITDA margins stood at 15.1 percent (EE: 15.7 percent), expanding 65 bps YoY/100 bps QoQ. Margins would have been materially higher but for one-off other expenses. Despite tough global macro conditions, FY25 performance was broadly in line. Equirus Securities Pvt Ltd, one of India’s leading domestic institutional equities brokerage firms, fine-tunes FY26/FY27 estimates and maintains LONG with a Jun’26 TP of INR 695 (INR 690 earlier) based on 40x (unchanged) Jun’27 EPS. Any adverse outcome from higher-than-expected US tariffs could materially impact earnings estimates.

India Set to Outpace Industry

India compressor revenues grew a healthy 12 percent in FY25 despite muted capex momentum. While inquiries remain strong, order finalizations are delayed as customers adopt a wait-and-watch approach. In the low-cost compressors segment, ELEQ is targeting a 30 percent share in the low-kW segment (25-30 percent of industry volumes), a space largely unserved by peers due to unviable pricing. ELEQ now offers competitively priced machines that match Chinese products in performance while maintaining its quality standards. Management targets 12-14 percent annual growth in India over the medium term, driven by 9-10 percent base growth and 3-4 percent incremental contribution from the upcoming full-scale launch of ‘Stabilisor’ and low-cost products by 3QFY26.

Overseas Recovery Underway, But Tariff Clouds Loom

Overseas compressor revenue grew 6 percent in FY25, rebounding from a 4 percent decline in FY24, on broad-based demand revival. 

●      US Compressor Profits Recover; Tariff Risks on Radar: The US business is recovering, led by industrial and medical segments; distribution has stabilized post-ERP transition. The portable compressor market, after three years of growth, declined 30-40 percent over the last two years and would remain subdued in FY26. Excluding one-time write-offs, the US business turned profitable in FY25. ELEQ aims to restore past profit levels by focusing on revenue-generating roles and cutting overheads via offshoring and shared services. Tariffs initially stood at 26 percent but have been temporarily reduced to 10 percent. If the US imposes a reciprocal tariff of 16.5 percent, ELEQ can maintain current pricing and profitability through cost-reduction initiatives. With 85-90 percent of motors to be produced in-house by FY26, ELEQ is well-positioned to absorb tariff impacts. However, a return to 26 percent tariffs would require additional measures.

●      Europe Hits Breakeven: In Europe, strong demand in 4Q helped ELEQ attain breakeven (excluding one-off tax consulting charges). Management is monitoring the impact of US tariffs on the EU economy and will hold off on further investment until there is more clarity. If needed, it will adjust costs and business scale to align with the new reality.

Multiple Margin Drivers Beyond Overseas Gains

Equirus Securities models an 18 percent EBITDA CAGR over FY25-28E, led by (a) operating leverage and cost savings from in-house manufacturing in India, (b) improving US/Europe profitability post-FY25 breakeven, and (c) a rising share of high-margin aftermarket revenue (27-28 percent in India, 13-14 percent in RoW) from an expanding installed base.

For more information: www.equirus.com, www.elgi.com