Shivalik Bimetal Controls Limited

Shivalik Bimetal demonstrated robust profitability in H1 FY26, with Profit After Tax (PAT) increasing by 26.3%. This was achieved despite a marginal 0.9% contraction in total volumes. The company's gross margin improved by 296 basis points, and consolidated EBITDA margin rose by 305 basis points year-on-year, leading to an Earnings per share (EPS) of ₹8.22. This performance underscores the effectiveness of the company's focus on pricing, product mix, and cost control.

The company's strategy is increasingly oriented towards higher value-added products and forward-integration initiatives. This involves moving from supplying raw materials in strip form to providing more complex components and assemblies. This shift, while potentially leading to lower top-line growth, is a key driver for the observed improvement in bottom-line profitability and margin expansion. Management noted that 80% of new developments in the last 24 months are related to small resistors, which are higher value-add.

The company's expected growth from US customers was significantly impacted by a 50% tariff on India, leading to a reduction in orders and forecasts as customers avoid carrying extra inventory. This, along with channel recalibration and deferred orders in Americas and Europe, caused shunt volumes to be subdued. Consequently, the full-year topline growth target for FY26 was revised down by 4-5% from the earlier 12-15% to a high single-digit or touch double-digit range. Muted demand was also observed in the domestic market due to Indian customers' export challenges.

Despite global headwinds^🌐, Shivalik Bimetal saw strong regional performance in Q2 FY26. India shunt sales grew by 25.23%, driven by robust demand from the smart meter and industrial sectors. Sales in Asia (excluding India) climbed by 38.5%, attributed to deepened customer engagement and expansion into new accounts. The company is particularly optimistic about the growth in automotive shunts, especially for two-wheeler EVs in India, and continued traction from the smart meter segment.

The company is making significant progress on indigenising nickel alloys, with base-level grades in final testing stages. This initiative is expected to enable local sourcing of 20-25% of total raw material consumption within 3-4 months, potentially reaching 50% next year. This backward integration is projected to reduce inventory days by approximately 30 days, leading to a positive impact on financial costs and improved cash circulation.

Shivalik Bimetal is actively developing new product lines, including PCBA assemblies and busbars. Revenue generation from PCBA assemblies is expected to commence in Q4 FY26, with a potential to contribute ₹50-70 crore to the topline in FY27. Busbar developments are focused on IP-protected designs with strong cost competitiveness. The company is also in advanced stages of entering new product verticals related to electronics components manufacturing, leveraging existing technical advantages.

The company reported ₹32 crore in capital work-in-progress as of September 2025, with approximately ₹20 crore allocated to its wholly-owned subsidiary, SEPPL. This capex is primarily directed towards automation initiatives, driven by increasing manpower costs and challenges in finding technical talent. The SEPPL capex, which also includes land acquisition for expansion, is expected to be capitalized by the end of December, indicating a strategic investment in future operational efficiency and capacity.

Management expressed confidence in further margin expansion, stating that the EBITDA margin could increase by another 2-3 percentage points beyond the current 23% over the next 2-3 year horizon. This is predicated on the continued focus on high value-added developments. For FY27, the company anticipates double-digit overall growth, potentially in the range of 13-14% to 17-18%, assuming resolution of trade-related issues and successful execution of new projects.