Borosil Stock Research Report

Capacity addition in core glassware segment drives growth…..

Takeaways: (1) Borosil reported strong industry leading revenue growth (+16.6% YoY) amid challenging demand environment. Capacity ramp-up in core glassware segment, trade discounts and premiumisation of product portfolio may have driven revenue growth, in our view. (2) Glassware segment had strong 25%/36.2% revenue growth in Q2/H1FY25. We reckon strong growth momentum may continue in H2FY25 led by higher capacity utilisation and product portfolio expansion. (3) Higher ad spends incurred ahead of festive season primarily led to higher other expenses. Resultantly, EBITDA margin contracted 96bps YoY. The company indicated higher ad spends are transient and annual average historical run-rate may be maintained for FY25. (4) Commissioning of borosilicate plant has led to relatively higher depreciation and finance cost, impacting profitability.

We believe Borosil is on track to report revenue CAGR in mid-teens and EBITDA margin in high teens over FY25-26E led by (1) higher utilisation at recently added capacities, (2) increased own production to revenue mix and (3) premiumisation of product portfolio. Maintain ADD.

Q2FY25 result review

Borosil reported revenue/EBITDA growth of 16.6%/9.6% YoY, respectively. PAT declined 1.2% YoY. Its gross margin expanded 416bps YoY led by change in product mix, in our view. However, EBITDA margin contracted 96bps YoY due to higher staff cost and other expenses. Commissioning of borosilicate plant led to higher depreciation and finance cost. Resultantly, profitability dipped in Q2.

Segment-wise performance

Opalware and non-glassware segments reported revenue growth of 14.5% and 14.3%, respectively, YoY. Glassware segment reported robust revenue growth of 25.0% YoY. We note all segments are driving healthy growth rates. We believe Borosil may have gained market share in Q2FY25 in consumerware segment, in our view.

Glassware leading the charge

Glassware segment reported strong 25%/32.6% YoY revenue growth in Q2FY25/H1FY25, respectively. We reckon capacity ramp-up at newly added manufacturing facility is driving the segmental growth for the company. With multiple growth levers of (1) higher capacity utilisation, (2) product premiumisation and (3) product portfolio expansion, glassware segment may continue its strong growth in H2FY25, in our view.

Valuation and risks

We model Borosil to report revenue/PAT CAGR of 14.9%/23.8% over FY24–27E and RoCE of 11.6% in FY27E. We maintain our ADD rating. On our DCF-based unchanged target price of INR 468, implied P/E works out to 52/45x FY26/27E EPS.

Key risks: (1) Sharp increase in input prices and higher than expected competitive pressure; and (2) failure of some new launches.