While revenue at Rs 20.1 billion was 2% ahead of our estimate, EBITDA at Rs 3.1 billion was largely in line. EBITDA margin at 15.7% was below our estimate of 16.1%. Revenue growth of 11% yoy is positive.
However, EBITDA margin improvement (up 100 bps y-o-y, 60bps q-o-q) was lower than anticipated, despite healthy industrial demand (inverter sales). RM/sales were up 140 bps q-o-q to 62.4% on higher lead costs. This was more than offset by 60 bps/150 bps q-o-q decline in staff costs/other overheads.
Transition to Ind-AS led impacted on other income at `143 million (estimate `174 million) and tax rate at 29.6% (estimate of 32%)
We see no major changes in our earnings estimates based on these results. We expect revenue growth trajectory to moderate to 8% in FY17 as automotive demand remains soft for EXID and inverter demand is also likely to remain muted. Q1 is the best quarter for margins and current lead prices have also increased by 9% compared to 1QFY17. This can impact on EBITDA margins by 200 bps if not passed on in the replacement segment. Hence, there could be some risk to our EBITDA margin estimate of 15.3% in FY17F.
Historical financials have been restated as per Indian Accounting Standards (Ind-AS), which have been adopted from this quarter. Thus, there has been a marginal upward revision in revenues and EBITDA margins (up 10bp) for past quarters. However, PAT largely remains unchanged, due to lower other income and tax rates. We maintain our neutral rating and `156 TP on the stock.