Sambhv Steel Tubes Q1 FY26 earnings call

Sambhv Steel Tubes Limited achieved its highest-ever quarterly revenue, EBITDA, and PAT in Q1 FY26. Revenue surged to ₹559 crores, marking a 69% year-on-year and 13% quarter-on-quarter growth. EBITDA reached ₹73 crores, increasing 58% YoY and 51% QoQ, with a robust 13% margin. Net profit stood at ₹33 crores, demonstrating a 35% YoY and 103% QoQ increase, with a 6% PAT margin. This strong performance was underpinned by a 50% YoY growth in total sales volume to 92,706 metric tons.

The company is embarking on a significant greenfield expansion project at Kesda, targeting a total capacity addition of 1.2 million tons of finished products across three phases. Phase 1 of this project, which includes 180,000 tons each of fully integrated pipes/tubes and stainless steel production, is slated for commissioning by the end of FY27. Concurrently, Sambhv has received consent to double the capacity of GP coils and stainless steel coils from 58,000 metric tons per annum to 116,000 metric tons each, with 76,000 tons of this increased capacity expected to be utilized in the next year.

Sambhv is strategically prioritizing the stainless steel segment, which currently accounts for 20% of its revenue and is projected to grow to 50% post-Phase 1 expansion. The company has a first-mover advantage in manufacturing thinner gauge stainless steel (down to 0.26 mm) and has recently commenced production of Series 304 and 316, expanding its product portfolio beyond Series 200. This focus is supported by a 20% annual demand growth in India, government initiatives like BIS standards restricting imports, and a less competitive domestic market landscape.

The company leverages its single-location backward integrated facility to control the entire value chain, enabling rapid product customization and a quick 5-6 day delivery turnaround time. Its strategic location provides proximity to raw materials (coal and iron ore within 200-250 km), reducing logistics costs. Sambhv employs a unique secondary manufacturing route for HR coils and advanced non-wash technology for galvanizing, which ensures superior product quality with no pores or black spots, enhancing durability and competitive pricing.

Sambhv utilized ₹440 crores from its IPO proceeds for debt repayment, working capital, and expansion. The company reported being 'virtually debt-free' in terms of term loans and plans to use approximately ₹200 crores in working capital loans for FY26 and FY27. Management is committed to maintaining working capital days at 20-25 and ensuring both debt-to-EBITDA and debt-to-equity ratios remain comfortably below 1, reflecting a prudent approach to financial leverage.

While ERW pipe volumes experienced a temporary decline in Q1 FY26, management attributed this to seasonality and a strategic shift towards higher-margin galvanized products and coils, showcasing production flexibility. The long-term demand for steel pipes and tubes in India is projected to grow significantly, with steel demand at 7-8% CAGR and pipe/tube demand rising from 12.3 million tons in 2024 to 18.5 million tons in 2029. The company aims for a 4-5% market share post-Phase 1, with a target of 10% in a few years.