We downward revise our FY26/27 earnings estimates by 4.4%/6.5% to for weak performance in Q4FY25 and rising domestic competition. GREENP has guided for domestic/export MDF volume growth of 28%/~12% (YoY) in FY26. MDF domestic realization increased by 7.2% YoY in Q4FY25 and margins stood at 16.3%, due to Export Promotion Capital Goods (EPCG) scheme incentives of Rs350mn and expect Rs510mn over FY26/27. The company expects MDF/plywood margin of 12%/7-8% in FY26. We had considered consolidated EBITDA margin of 11.8% with 1) steep increase in timber prices, 2) higher OEM vol in the MDF segment, 3) lower domestic volumes, and 4) lower realization with competition in MDF. Timber prices will continue to impact margins in coming quarters. The management has indicated moderation in timber prices only with new crop arrival from FY26. We estimate revenue/EBITDA/PAT CAGR of 19.9%/62.1%/70.6% over FY25-27E with MDF volume CAGR of 21.2%. We maintain ‘BUY’ rating with a TP to Rs310 (Earlier Rs330), based on 18x FY27E earnings.
Revenues declined by 5.6%, PAT decline 1.4%: Rev. down 5.6% YoY to Rs3.7bn (PLe: Rs4.1bn). MDF segment decline 15.4% YoY to Rs3.1bn. MDF vol. declined by 19.9% YoY to 102kCBM (domestic volume decreased 24.9%, export volume increases 33.8%) and reported blended realization of Rs 29,961/CBM (+5.8% YoY) and domestic realization was Rs 31,214/CBM (+7.4% YoY). Plywood segment reported a revenue of Rs338mn down 5.3% YoY. Plywood vol. decline by 12.0% YoY and reported realization was Rs270/sqm, up 7.5% YoY. EBITDA decline by 6.5% YoY to Rs 480mn (PLe:Rs227mn). EBITDA margin contracted by ~10bps YoY to 12.8% (PLe:5.6%). In MDF segment, EBITDA margin remain flat at 16.3% due to Export Promotion Capital Goods (EPCG) scheme incentives which was ed at Rs350mn. PBT decline by 26.2% YoY to Rs297mn (PLe:Rs97mn). PAT decline by 1.4% YoY to Rs294mn (PLe:Rs73mn)
Concall highlights: 1) Green expects MDF volumes to reach 550kCBM in FY26, (currently 439k CBM), driven by 10–12% growth from existing plants and 72kCBM contribution from the new AP facility. Domestic/Exports volumes are expected to grow at ~28%/12% YoY, with a overall margin of 12%. 2) For FY26, the company expects margin of 7-8% in plywood segment. 3) Domestic MDF volumes declined in Q4FY25 due to the discontinuation of commercial grade MDF sales, which are non-compliant with BIS norms. In FY25, domestic volumes decline by 6%, with commercial grade MDF contributes for a 3%. 4) In Q4FY25 MDF segment company receives Export Promotion Capital Goods (EPCG) scheme incentives of Rs350mn which drives the margin. The total incentive amount is Rs860mn, remaining Rs510mn will be ed over FY26/27. 5) Plywood segment margins got expanded in Q4FY25 due to lower provision for turnover discounts (Rs12.5mn write-off) at the year-end due to dealers not meeting volume targets. 6) Company has started commercial production at the new AP plant with a utilization of 35% for FY26 and expects it to improve by the end of FY26. The plant will produce thin MDF (currently 60% of this is imported in India) with 15-20% higher realization. However, Initially, it will focus on industrial-grade thin MDF with realizations of 25-26k/CBM and it is expected to take three years to have a similar VAP mix as the existing plant. 7) Timber Prices: in Q4FY25, North prices stood at Rs 6.4/kg (vs Rs 6.3/kg) up 2.4% YoY & South prices stood at Rs6.2/kg (vs Rs5.3/kg) up 17.8% YoY. Company expects timber prices to stabilize in FY26.8) The contribution of VAP is 50% in volume and 62% in value . 9) In FY26, the company has planned a capex of Rs 300–350 mn, with Rs 250 mn allocated for the new AP plant and the remainder for maintenance. 10) The total MDF supply in South India has reached 1.3mn CBM with 35-40% of the total demand comes from South. 11) The BIS QCO expected to be implemented from Feb’26 leading to increased demand for furniture manufacturing. 12) MDF Imports have massively declined post BIS implementation in Feb’25. In April’25 the imports stood at 1100 CBM.
Sun Pharma (SUNP) Q4FY25 EBIDTA (+11% YoY) was largely in line however moderate growth (9% YoY) in specialty sales after several quarters of strong double-digit growth was below our estimate. Over last few years SUNP dependency on US generics has reduced and company’s growth is more functional on specialty, RoW and domestic pharma that has strong growth visibility. Though FY26 expenses (an additional $100mn spend) is likely to remain elevated given company are in investment phase to ramp up specialty pipeline; successful launch of Leqselvi and Unloxcyt along with progress of other pipelines will be key. Our FY26/FY27E EPS stands reduced by 4-5% as we factor in higher opex. We maintain ‘BUY’ rating with revised TP of Rs.2,000 based on 32x FY27E EPS. SUNP remains our top pick in large cap space.
Mixed bag- Strong domestic formulation sales while specialty sales growth below 10%: Revenues came in at Rs 129.6bn up 8% YoY vs our est of Rs 130.5bn. Domestic formulation growth was strong at 14% YoY. US sales came in $464mn ($474mn in Q3FY25). We estimated $486mn. Global specialty sales were up 9% YoY (down 9% QoQ adj for milestone) to $295mn. RoW markets grew by 6% while EMs growth stood at 11% YoY. API sales were up 28% YoY.
In-line EBITDA: Reported EBIDTA came in at Rs 34.2bn. up 11% YoY against our estimate of Rs 35bn. OPM came in at 26.4% up 50bps YoY while down 200bps QoQ adj for milestone. GMs adj milestone came in at 79.4%, up 40bps QoQ (flat YoY). Other expenses ex R&D came in higher at Rs 36bn, up 8% YoY and 7% QoQ. R&D spend declined by 9% YoY (6.3% of revenues) at Rs 8.2bn. There were certain one-offs in Q4FY25 – Rs 2.6bn impairment of investment in Lyndra therapeutic, Rs4.8bn towards restructuring of operations in US and writing off deferred tax asset. Forex gain stood at Rs 2.9bn. Adj for one off and forex gain PAT came in at Rs 26bn in line with our estimate. EPS adj for one off stood at Rs 11/share.
Key concall takeaways: Domestic formulation: Growth driven by increased market share (8.3% up from 8%), new product launches, and higher volumes. 10 products launched during the quarter. Future pipelines include launches in diabetes and weight management. US: Weakness experienced in generics business. Contribution from gRevlimid was stable but not significant QoQ. Launched 2 generic products in US markets. Global Specialty Sales: Q4 specialty sales growth was moderate due to insurance resets in Jan–Feb month. Growth in the key specialty products continues to remain strong. Global Ilumya sales were up 17% YoY to $681mn in FY25 which does not include end market sales from its partners. Global specialty R&D spend contributed 36% to the overall R&D spend. Post favorable outcome from the court the company is targeting Legselvi launch for Q2FY26; at-risk due to ongoing litigation. GL0034 trial to begin in type 2 diabetes. Seeking partnership for MM II development in various markets. EMs: Delivered 11.5% growth in CC YoY. Brazil, Romania and Russia remains as the key growth markets. Focus on current high-growth markets with limited expansion. RoW: Focus remains on targeting key therapeutic areas in dermatology and chronic therapies. Tariff: Awaiting clarity on US legislation impacting drug pricing; currently no impact. Mgmt cited that shifting of third-party production of specialty sales to US amid tariff risks; will take 2–3 years and lot of cost. FY26 guidance: Expects mid-to-high single-digit revenue growth. $100 mn additional investment planned in FY26E for new specialty launches (esp. Leqselvi and Unloxcyt). R&D spending guidance in 6-8% of sales range for FY26E.
We are upgrading ITC from Accumulate to BUY as we expect current margin/growth pressures to subside post 1H26. ITC is suffering margin pressure in cigarettes (high leaf tobacco prices and volume focused strategy), Paper (High wood prices and dumping) and FMCG (Tepid volumes, high input costs and hit in stationary business). However, we expect the scenario to change as leaf tobacco prices have started softening in current season, new wood supplies, integration of century paper and bottomed out margins (~40% of normal levels) and expected recovery in demand margins in FMCG business.
4Q cigarette volume growth of 5% with QoQ margin improvement reinforces success of volume driven strategy. FMCG business has shown resilience, and we expect ITC to be more aggressive in new acquisitions than in the recent past which should push growth. Nicotine exports in leaf tobacco have started which should margin recovery in Agri business.
We make a change of -3.4/1.2% to our estimates for FY26/27 and estimate 11% PAT CAGR over FY25-27. We believe ITC offers a favorable risk reward at 21.4xFY27 EPS and a dividend yield of 3.5%. We assign SOTP based target price of Rs538 (Rs528 earlier). BUY.
4Q Revenue up 9.6%, ~5% volume growth: Revenues grew by 9.6% YoY to Rs172.5bn (PLe: Rs169bn). EBITDA grew by 2.5% YoY to Rs59.9bn (PLe:Rs 63.4bn); Margins contracted by 242bps YoY to 34.7% (PLe:37.5%). Adj. PAT has declined 2.9% YoY, excluding the impact of hotel business spin off in the base quarter, PAT increased by 0.8% YoY. Board declared a final dividend of Rs.7.85/share.
4QFY25: Cigarette volumes up 5%, broad based margin pressure across segments
- Cigarette Revenues grew 6% YoY to Rs84bn on led by 5% volume growth, portfolio & micro-market interventions; EBIT grew 4% YoY to 51.2bn. Margins contracted 120bps YoY to 60.9% Margins were ed by product mix enrichment and cost control, despite high leaf tobacco prices
- FMCG Revenues grew by 3.7% YoY (~5% excluding notebooks) to Rs54.9bn; EBIT de-grew by 28% YoY to 3.4bn. Margins contracted by 273bp to s YoY to 6.3%. EBIDTA margins were 8.4%.
- Agri sales grew 17.7% YoY to Rs36.5bn led by strong export growth of leaf tobacco; EBIT grew 26% YoY to 2.6bn. Margins expanded 46bps YoY to 7%
- Paperboard & Paper Revenues grew by 5.5% YoY to Rs21.9bn; EBIT de-grew by 31% YoY to 2bn. Margins contracted by 491bps YoY to 9.2% on high wood prices and pressure on paper prices due to Chinese dumping
Mixed production profile of standalone oil (+0.4% QoQ) and gas (-1.9% QoQ) combined with marginally higher oil price realization of USD73.7/bbl in Q4 vs USD72.6/bbl in Q3FY25 resulted in revenues of Rs349.8bn, +3.8% QoQ. EBITDA of Rs190bn (+0.2% QoQ) was 3.8% higher than our est of 183.2bn & consensus of Rs179.7bn. Much higher DDA led by write-offs resulted in PBT declining by 20% QoQ to Rs88bn (PLe Rs107bn) despite growth in rev. PAT stood at Rs64.5bn, -19.6% QoQ (PLe Rs80bn, consensus Rs88bn). Standalone FY25 EBITDA stood at Rs748bn, +3% YoY while PAT stood at Rs356bn, -12% YoY. Going ahead, we build in 7% and 5% volume growth in oil and gas production in FY26E. The stock is currently trading at 8x FY27 conso EPS, with USD71.3/75/bbl of Brent in FY26/27. We remain positive on the stock but downgrade from Buy to Accumulate due to ~10% run-up in the stock post preview. We value the company at Rs276, valuing the standalone business at 8x FY27 adj EPS and adding the value of investments. Key risk to our recommendation is sustained <USD60/bbl of Brent. With every USD5/bbl change in oil price realization, conso EPS is impacted by 8-9%.
Volume a mixed bag: Oil production stood at 5.3mmt, +0.4% QoQ while gas production stood at 5bcm, -1.9% QoQ. For the full year, oil production stood at 20.9mmt, -1.2% YoY and gas production stood at 20.2bcm, -2.2% YoY. Production of value added products stood at 669tmt during the quarter against 663tmt in Q3FY25 and 640tmt in Q4FY24. For the full year, value added products rose by 2.6%. For OVL, oil and gas production in the quarter stood at 1.79mmt and 0.8bcm, nearly flat both QoQ and YoY. For the full year, OVL’s oil and gas production stood at 7.2mmt, flat YoY while gas declined 12% YoY to 3bcm.
Production growth expected: ~5mmscmd of gas from Daman Upside is expected to be added in Q4FY26 while KG-DWN-98/2 is expected to be ramped up to 10mmscmd. Going ahead, we build in a volume growth of 7% and 5% for oil and gas, respectively, in FY26.
Concall highlights: 1) 578 total wells drilled in FY25, highest ever, including 469 developmental wells and 109 exploratory wells 2) capex of Rs620bn in FY25 included infusion of Rs184bn in OPaL; guidance of Rs350-400bn going forward 3) reserve replacement ratio above one for 19th consecutive year 4) ONGC Videsh reported PAT of Rs4.2bn in FY25vs Rs4.9bn in FY24, 5) the company declared nine new discoveries in FY25, 6) gas production likely to rise by 5-6% each year for next two years.