Honeywell Automation India's Q1 EBITDA beat JM Financial estimates by 15%, driven by gross margin strength. Brokerage maintains Buy with ₹48,740 target, citing stable margins and West Asia exports.
Alpha Score of 67 reflects moderate overall profile with strong momentum, strong value, weak quality, moderate sentiment.
Honeywell Automation India beat JM Financial's EBITDA estimate by 15% for the fiscal first quarter, driven by gross margins that held at 41% against the brokerage's 39% forecast. JM Financial maintained its Buy rating and lifted its price target to ₹48,740 from ₹44,000, rolling the valuation forward to September 2028, the firm said in a note.
Revenue was in line with expectations. The margin improvement that appeared in the fourth quarter of last fiscal year continued, JM Financial analysts wrote. Higher-margin order execution and lower loss-order provisioning pushed EBITDA margin to 14.3%, up about 240 basis points year-over-year and 190 basis points above the brokerage's model.
JM Financial expects gross margins to hold in the 40-41% range over the next two fiscal years, supporting EBITDA margins of 15-16%. If Honeywell Automation's "razor and razor blade" strategy – selling core platforms and then layering high-margin services – succeeds, EBITDA margins could reach 18-20%, the brokerage said.
Exports to West Asia are a tailwind. Honeywell Automation supplies equipment for oil and gas, renewables, electrolysers, transmission gear, and data centres. JM Financial sees continued capex in those sectors. The rupee's depreciation against the dollar also provides a boost. Services and exports carry higher margins, so there is scope for further upside, the analysts said.
HWA shares have risen 50% so far this fiscal year. They trade at 51 times estimated FY27 earnings and 44 times FY28 estimates, well below peers like ABB India and Siemens, according to JM Financial. The stock sits near the lower end of its 10-year trading range of 40 to 60 times earnings, reflecting the margin weakness of recent years and a lack of management communication over the past several quarters, the brokerage said. The target price implies about 15% upside from the current level.
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