ESAB India FY26: Margin Expansion Meets Valuation Gravity

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1. At a Glance

ESAB shipped FY26 results that put the profit engine in clear view: ₹206.7 cr PAT on ₹1,508 cr revenue, up smartly in a 2-year window where PAT compounded at 12.6%. The quarter itself (Q4 FY26) landed at ₹43.6 cr profit, but that’s a -8.2% stumble from a year prior—a hiccup the headlines brushed past.

The worry signal lives in the multiple. At 42.8x current price ÷ annualised EPS, the market is paying a steep fee for what looks like a mid-teen growth story.

The core tension: an operation delivering clean mid-double-digit PAT growth and ROCE north of 65%, strapped to a valuation that demands precision like a surgeon. One slip quarters or a miss in guidance flips sentiment.

2. Introduction

ESAB India sits inside a global welding-and-cutting-products empire—parent ESAB Corporation (USA) owns the show through ESAB Holdings Ltd (UK). The company makes arc welding equipment, consumables, plasma cutting gear, robotics, and digital solutions, shipping 73% of revenue from manufactured goods, 21% from traded inventory, 6% from engineering services.

It’s been building for decades. The original welding operation arrived in 1987 via a buyout from Peico (now Philips India). M&A and organic expansion followed: Indian Oxygen’s welding business in 1991, Flotech in 1992, and Maharashtra Weldaids in 1994. That foundation shows: the company holds a moat-ish distribution network (~200 dealers nationwide; 80% of sales flow through them).

FY26 anchored on a quiet moment for the global economy, yet the company expanded EBITDA to ₹293 cr (PBT ₹274 cr + Interest ₹2.1 cr + Depreciation ₹17.1 cr) and net profit to ₹206.7 cr, with overseas presence sprawling across 30+ countries.

3. Business Model: WTF Do They Even Do?

Welding equipment and consumables sit at the bottom of any heavy fabrication pit. Steel, ships, pipes, chassis, pressure vessels—anything joined by arc heat is ESAB’s playground.

The moat isn’t thick. Welding is a decades-old craft; the tech doesn’t leap. Margins hang on operational discipline, supply-chain cost, and dealer loyalty. The company reports 18% operating profit margins in FY26, respectable but not untouchable.

Distribution owns the real piece. With ~200 dealers locked into the ecosystem, ESAB sits once-removed from end customers. Dealers absorb margin, but they lock in shelf space. Switching to a competitor costs the dealer retraining and lost relationships.

Manufactured goods (73% of revenue) is where reputation lives. Traded goods (21%) are resale margin plays. Engineering and services (6%) are noise with a purpose: they anchor client relationships.

The company also exports—documents show shipments to Australia, Brazil, Russia, Middle East, Singapore, Poland, Sweden, Vietnam, Kenya, Nigeria, Uzbekistan, and 20+ others. FX winds can sway quarterly results, and the global capex cycle sets the floor.

4. Financials Overview

Figures are consolidated, in ₹ crore.

Quarterly Performance (Q4 FY26 vs Q4 FY25):

The year landed smoothly: sales and PAT both leapt, with profit growth outpacing revenue growth. That’s margin expansion in action. The quarter, though—March 2026 returned a lower absolute profit despite higher sales, suggesting either one-time items or operational chop in the final stretch.

The company recorded an exceptional gain of ₹1,726 lakhs from the sale of land in West Bengal and a one-time ₹1,365 lakhs gratuity liability hit from the new Labour Code (Nov 2025). Strip those out and the underlying Q4 beat holds.

5. Valuation Discussion: Fair Value Range (Educational Only)

What follows is a walkthrough of how three valuation methods work, using this company’s numbers as the example — not a target, not a forecast, not advice.

Method 1 (P/E Multiple): Annualised EPS ₹134.28 × peer band 23–46x produces ₹3,087–₹6,177.

Method 2 (EV/EBITDA): EBITDA ₹293.13 cr ÷ 1.54 cr shares = ₹190 per share EBITDA multiple; peer band 15–32x produces ₹2,850–₹6,080.

Method 3