Natural rubber rises 20% and Pathik Tyres can pass only part of it on, with a lag. Show the EBITDA margin quarter by quarter in the first year under base, bull and bear pass-through cases.

Every case starts the year at 8.8%; the base case recovers to 11.1% from the third quarter and the year lands at 10.0%. Rubber is 26% of revenue, so a 20% rise costs Rs 104 crore a quarter, 5.2 points of margin. Base: 50% recovered from Q3, year 10.0%. Bull: 80% from Q2, year 11.6%. Bear: 25% from Q4, year 9.1%. No case gets back to 14% within the year, because the lag is a loss that no later price rise refunds.

A tea stall whose milk price jumps does not raise the price of a cup the same morning; for a while it absorbs the difference. The size of what Pathik absorbs is a chain: 65% of revenue is cost of goods, 40% of that is rubber, so rubber is 26% of revenue, and 20% more rubber is 5.2% of revenue, Rs 104 crore a quarter. Quarterly EBITDA falls from Rs 280 crore to Rs 176 crore and the margin from 14% to 8.8%, in every case, because no case has a price rise in the first quarter.

A pass-throughThe share of a cost increase that a company recovers by raising its own prices, and how quickly. has two parts, a share and a date, and both are judgements about customers and competitors. Price rises recover the share times the cost increase: 25%, 50% or 80% of Rs 104 crore, from the fourth, third or second quarter. Once a rise lands, margin recovers only partly, because even 80% recovery leaves 20% of the cost unrecovered and the price rise itself slightly inflates revenue, the denominator. So the bull case recovers to 12.4%, the base to 11.1%, the bear to 10.0%.

The year's EBITDA is decided more by the lag than by the eventual share: the quarters before the price rise are a loss that nothing later refunds. That is why the quarterly build matters and an annual average would mislead. It also shows what the planning head should ask the sales team: not whether prices can go up, but when the first invoice at the new price goes out, and whether contracts with the car makers, who often reset prices on a formula with a lag, are the ones that move last. The bear case is not pessimism about the share so much as realism about the calendar.

The limits: volumes are held flat, and a price rise usually costs some volume, especially in the replacement market; rubber prices rarely step once and stay; and the margin recovery assumes competitors move too, which is the real uncertainty behind the share. The model is a frame for those conversations, and a second year with full pass-through in place is where the margin would heal, if it does.