Usha Martin’s higher-value mix offsets Middle East weakness as margins improve

Investment View and Target Price

In its July 30, 2026 Q1 FY27 result update, PL Research remained constructive on Usha Martin, citing resilient value performance despite geopolitical disruption in the Middle East. The broker maintained its BUY rating and raised its target price to Rs 594 from Rs 585.

The investment case is supported by Usha Martin’s premium product mix, higher net sales realisation (NSR), cost pass-through, growing penetration with global original equipment manufacturers, specialised-rope capacity additions and potential recovery in Middle East demand.

Q1 FY27 Financial Performance

Usha Martin reported consolidated Q1 FY27 revenue of Rs 10.33 billion, up 16.4 per cent year-on-year and 5.5 per cent quarter-on-quarter. Revenue exceeded PL Research’s estimate of Rs 10.18 billion by 1.5 per cent.

The volume weakness reflected the conflict in the Middle East. However, healthy demand in India, Europe and the US, particularly in wire ropes and higher-value applications, offset a sharp 28 per cent decline in Middle East volumes. International business accounted for 57 per cent of quarterly revenue, or Rs 5.88 billion.

Operating performance was stronger than PL Research expected. Product mix, pricing and complete pass-through of higher steel, energy and freight costs supported profitability. Adjusted PAT was aided by operating performance and lower interest costs, despite lower other income.

Product Mix and Realisation Trends

Wire-rope volume was flat year-on-year and sequentially at 26 kilotonnes. Wire and strand volume rose 17 per cent year-on-year to 14 kilotonnes, while LRPC volume fell 15 per cent year-on-year and 8 per cent sequentially to 11 kilotonnes.

Domestic rope volumes grew 12 per cent, led by elevators and mining, while wire volumes increased 19 per cent. Quarterly NSR improved sequentially by 7 per cent for wire ropes to Rs 2,91,000 per tonne, 13 per cent for wires and 21 per cent for LRPC, including plasticated LRPC.

Usha Martin secured its first international plasticated LRPC stay-cable order and continued to gain traction in the OceanFibre portfolio, reinforcing its value-added special product offering.

Growth Outlook and Capacity Expansion

Management expects FY27 volume growth of 10 to 12 per cent and value growth of 15 per cent, with sustainable EBITDA margin above 20 per cent through premiumisation, improved product mix and cost discipline.

The company is expanding constrained domestic elevator-rope capacity by 6 kilotonnes per annum. Phased commissioning is expected to begin in October 2026, with completion targeted in Q1 FY28.

• Capex in Q1 FY27 was Rs 730 million.
• Net cash improved to Rs 4.65 billion from Rs 3.32 billion in Q4 FY26.
• Working-capital days improved to 187 from 194.

Estimates and Valuation

PL Research increased its FY28E and FY29E sales estimates by 2.4 per cent each and its EBITDA estimates by 2.3 per cent and 0.8 per cent, respectively, assuming higher NSR.

The target price of Rs 594 is based on 25 times September 2028 EPS of Rs 23.8.

Key Monitorables and Risks

The Middle East, which represents about 9 per cent of revenue, remains affected by geopolitical disruptions and delayed projects. The company must also sustain volumes and premiumisation amid elevated input, energy and freight costs.

A normalisation in the Middle East could provide upside across crane, elevator, offshore, marine, ports, logistics and infrastructure applications.