Varroc Engineering (VARE.NS) 1QFY27 Results Above Estimates Driven by Revenue Beat; Margin Disappoints

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06 Aug 2026 14:00:34 ET │ 16 pages

Varroc Engineering (VARE.NS)

1QFY27 Results Above Estimates Driven by Revenue Beat; Margin

Disappoints

CITI'S TAKE

Varroc’s 1QFY27 results were above estimates, driven by higher-thanexpected revenue growth. The growth was particularly strong in the emobility segment, supported by strong growth of EV market (rising E2W

penetration). Mgmt expects demand to remain healthy, and targets 2025%YoY revenue growth for FY27 (not a guidance). EBITDA margin at

8.4%, however, was below estimate, as cost pressures remain elevated.

Salience of EV revenue is increasing with 16% of 1QFY27 revenue being

contributed by EV models. We revise our estimates upwards given

stronger than expected topline growth on the back of EV segment’s strong

performance. Target price (based on 21x Sep'27EPS) changes to Rs540

from Rs490 earlier. We acknowledge that revenue growth has been

commendable, but margin trajectory has disappointed. We are also

concerned regarding the increasing debt levels. We maintain Sell on

Varroc.

1QFY27 Results — Revenue at Rs26.4bn (+30%YoY; +11%QoQ) was 12% above our

estimate. While gross margin at 34.8% (-250bpsYoY; -100bpsQoQ) was slightly

below our 34.9% estimate, beat at the EBITDA level was relatively moderate. EBITDA

at Rs2.2bn (+14% YoY; Flat QoQ) was 8% above our estimate, due to higher

employee cost and other expenses. Mgmt noted that EBITDA margin at 8.4% (-120

bps YoY; -100bps QoQ; Citi est: 8.8%) was impacted by unfavorable sales mix from

lower-margin tooling revenues (~80bps impact), lower renewable energy-related

power cost savings (~20bps), higher casual manpower expenses (~50bps), and

under-recovery of commodity related inflationary costs, including in the aftermarket

business (~70bps). PAT at Rs773mn (+31%YoY - adjusted for exceptionals;

+11%QoQ) was 17% above our estimate driven by lower depreciation and

amortization costs, partly offset by higher-than-expected tax expense.

Sell

Price (06 Aug 26 15:30)

Rs737.85

Target price

Rs540.00↑

from Rs490.00

Expected share price return

-26.8%

Expected dividend yield

0.2%

Expected total return

-26.6%

Market Cap

Rs112,733M

US$1,185M

Arvind SharmaAC

Sanchit Chandna

…