Shankara Buildpro Q1 FY27 earnings call

Shankara Buildpro Limited reported a robust Q1 FY27 with total revenue from operations reaching ₹1,890 crores, marking a 21% year-on-year growth. Profit After Tax (PAT) also increased by 12% year-on-year to ₹35.8 crores. This performance was achieved despite a challenging macro environment, geopolitical tensions, and energy inflation that impacted construction activities and market sentiment in April and May.

The steel marketplace delivered 2.5 lakh tons of volume in Q1 FY27, a 10% year-on-year growth, and steel revenue grew 21% year-on-year to ₹1,725 crores. Management highlighted that this growth was significant given the broader industry remained flattish or struggled during the quarter. Core categories like pipes, tubes, flats, and roofing showed good volume growth, with demand improving in June and July.

The non-steel marketplace demonstrated a healthy improvement, with revenues reaching ₹165 crores, up 15% year-on-year and 2% sequentially. This validates the company's expectation of a resurgence in non-steel for FY27. Key drivers included a 32% growth in fittings and sanitary ware, and a 40% growth in accessories and electricals, despite the tile industry being significantly impacted by external crises.

The reported EBITDA margin for Q1 FY27 was 3.26% (₹62 crores, up 17% YoY). However, management noted an inventory loss of approximately ₹10 crores due to steel price corrections in May and June, which impacted the margin by about 0.5% bps. Adjusting for this, the underlying EBITDA margin would have been around 3.8%. The company targets a steady-state EBITDA margin of 3.5%+ and aims for 4% in the medium term.

The company maintained strong operational efficiency with ROCE at 35% and working capital at 27 days, well below the 30-day mark. Same-store sales growth remained robust at 21% for the quarter. Shankara Buildpro expanded its network by adding three new stores/fulfillment centers and 34 customer touchpoints in Q1, with plans to add five more fulfillment centers in the coming quarters^⏳, totaling 8-9 for FY27.

Management reiterated its confidence in achieving a 1.2 million ton steel volume target and 25% non-steel growth for FY27. Long-term goals include reaching 2 million tons of steel volume in about 4 years. Capital allocation priorities include investing in private labels, value-added steel products (like warehousing, cutting, laser cutting), and optimizing working capital by reducing acceptances. Acquisitions are also on the table if suitable opportunities arise.

Management observed a decrease in competitive intensity over the last couple of quarters, particularly from smaller, low-margin players who struggled with inventory losses and credit management. This shift benefits organized players like Shankara Buildpro, especially as the market moves towards more sophisticated, value-added steel applications. The company also announced a stock split, converting one ₹10 FV share into five ₹2 FV shares, to encourage wider participation and enhance liquidity.