SCODATUBES

Scoda Tubes Limited reported a steady performance in Q2 FY26, with consolidated revenue broadly flat at INR145.3 crores, contributing to a 5% YoY growth in H1 FY26 to INR242.7 crores. Net earnings saw significant growth, increasing by 34% YoY to INR14 crores in Q2 FY26 and 49% YoY to INR21.1 crores in H1 FY26. PAT margins improved by 212 basis points to 9.6% in Q2 FY26 and 211 basis points to 8.7% in H1 FY26, despite a slight decline in EBITDA margins to 15.4% in Q2 FY26 and 15.1% in H1 FY26.

The company is aggressively expanding its manufacturing capabilities. Seamless capacity has already increased from 10,000 MTPA to 17,000 MTPA, with a further target of 20,000 MTPA by December 2025 following the delivery of two more pilger machines. For welded tubes and pipes, commercial production is targeted for Q1 FY27, aiming to increase capacity from 11,088 MTPA to 33,128 MTPA. Management expects blended utilization to reach 60-65% by FY26 and 80% by FY27, with full utilization for both segments by FY28.

Scoda Tubes has made a strategic move to expand its international footprint through the acquisition of Arvind sp. zo.o., a trading firm based in Poland. This acquisition is aimed at strengthening the company's presence in Europe and opening opportunities in high-growth sectors such as oil and gas, wheat exchanges, and refineries in the Eastern European market. The company believes this will unlock significant long-term value by integrating its manufacturing strength with Arvind's established distribution network and local expertise.

The current order book stands at INR194 crores, with a healthy split of INR90 crores from domestic orders and INR104 crores from exports. Management noted that the Indian market for stainless steel pipes and tubes is experiencing 7-8% annual growth, with a demand of approximately 3,80,000 metric tons and a current production shortfall of 20,000-25,000 metric tons. This indicates robust underlying demand, despite a slight slowdown in global oil and gas capex, which is offset by strong opportunities in the power and renewable sectors.

In H1 FY26, the company incurred INR45.9 crores in capex, with INR27 crores from IPO proceeds deployed towards capacity expansion. The total estimated capex for FY26 remains at INR100 crores. From IPO proceeds, INR110 crores remain in bank balances, and INR50 crores have been utilized for working capital. Management addressed the sharp rise in inventory in H1 FY26, stating it was due to stocking up for anticipated H2 FY26 demand, and expects inventory levels to normalize from Q3 FY26.

The company expects blended margins to remain in the 15-16% range, driven by a higher contribution from welded products and new product launches. Seamless products typically yield 16-18% margins, while welded products contribute 12-13%. Raw material prices, which declined by 5-10% over the past 24 months, are expected to remain stable at current levels for the next 12 months, with no significant fluctuations anticipated.