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SG Mart Limited — Q2 FY26 earnings call

Call held 31 Oct 2025

Company page: SG Mart share price, financials & guidance record

Management summary

SG Mart reported a challenging Q2 FY26 due to macro slowdown and steel price volatility, yet achieved over 50% QoQ revenue growth to ₹1,700 crores+. Profitability was impacted by inventory losses and one-off branding expenses, leading management to revise down its FY26 EBITDA target. The company is strategically shifting towards higher-margin service centers and renewable structures, which are expected to drive future growth and profitability from Q4 FY26.

Highlights

  • Revenue exceeded ₹1,700 crores, marking a 50% QoQ increase.

  • H1 FY26 EBITDA stood at ₹64 crores, with the full FY26 target of ₹200 crores now deemed difficult.

  • Q2 FY26 EBITDA margin was 1.6%, impacted by inventory losses and pre-booked branding expenses.

  • B2B metal trading revenue grew 50% QoQ, contributing 30% to total revenue.

  • Service center business contributed 50% to total revenue, with volume increasing 35% QoQ.

  • Renewable structure business contributed 4% to revenue, with an order book of ₹260 crores.

  • Working capital days were 22 as of September 30, 2025, slightly higher than Q1.

Concerns

  • Steel Price Volatility

  • Guidance Miss

Key financials

5 periods

Headline

  • Revenue
    ₹1,700 Cr
    QoQ +50%
  • Working Capital Days
    22 days
  • Inventory Days
    27 days

Q2 FY26

  • EBITDA Margin
    1.6%

H1

  • FY26 Revenue Growth
    0%
    YoY 0%
  • FY26 EBITDA
    ₹64 Cr
  • FY26 EBITDA Growth
    61%
    YoY +61%
  • FY26 Net Profit Growth
    38%
    YoY +38%
  • FY26 Cash Profit Growth
    47%
    YoY +47%

FY23

  • EBITDA
    ₹62 Cr

FY24

  • EBITDA
    ₹103 Cr

What they filed

Q1 FY27: revenue up 14.4%, net profit up 43.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,793 1,335 1,595 1,144 1,704 −5%1,644 +23%1,823 +14%1,309 +14%
EBITDA15 22 37 36 28 +87%17 −23%56 +51%59 +64%
Net profit16 28 33 32 27 +69%11 −61%41 +24%46 +44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of EBITDA per ton
₹5,000 Total
  • Renewable Structure ₹2,000 40.0%
  • Service Center Business ₹1,500 30.0%
  • Distribution Product Business ₹1,000 20.0%
  • B2B Metal Trading ₹500 10.0%

Capital allocation

medium confidence
  • Capex ₹200 Cr From profits and cash on books
    • Setting up profiling machines in service centers
    • Building service centers
    So this year, we do whatever short of INR200 crores and INR50 crores, we could use our cash on books.
  • Liquidity Liquidity disclosed Cash on books is used for capex.
    So this year, we do whatever short of INR200 crores and INR50 crores, we could use our cash on books.

Guidance & targets

Profitability

  • FY26 EBITDA Profitability · FY26 · Low confidence INR200 crores
    So Vivek, definitely, it is now difficult to achieve INR200 crores EBITDA for FY '26 because Q2 was pretty much below expectations in terms of margin spreads.

    — Anubhav Gupta

  • ROCE Profitability · long-term · High confidence 20-25%
    That being said, the ROCE targets of 20%, 25% remains as it is.

    — Anubhav Gupta

  • Q4 FY26 Exit Run Rate Profitability · Q4 FY26 · Medium confidence closer to full year guidance
    So Q4 should be the exit run rate we should look at, and that's our milestone as management that, that should be the exit run rate, which will give the true color of what SG Mart can do.

    — Anubhav Gupta

  • Q3 Performance Profitability · Q3 FY26 · High confidence near about Q2 performance
    It's my understanding that Q3 performance should be near about Q2 performance, which I said very clearly earlier.

    — Anubhav Gupta

Capacity

  • Service Centers added Capacity · year-on-year · High confidence 4-6 year-on-year
    And each year, we want to add 4 to 5, 6 service centers year-on-year.

    — Anubhav Gupta

  • New Service Center in Jaipur Capacity · Q4 FY26 · High confidence 1
    We expect 1 service center to start in quarter 4 in Jaipur.

    — Anubhav Gupta

Revenue Contribution

  • Renewable Structures Contribution Revenue Contribution · Q3 FY26 · High confidence double from Q2
    In the current quarter of Q3 FY '26, the contribution could double from renewable structures what it was in Q2.

    — Anubhav Gupta

Product Development

  • New products in renewable vertical Product Development · next 12-15 months · High confidence 10-15 products
    There are like a lot many 10 to 15 products, which we are going to add in the next 12 to 15 months.

    — Anubhav Gupta

Efficiency

  • Working Capital Days Efficiency · going forward · High confidence 15-25 days
    So I guess, we should be around 15 to 25 days in between as our working capital cycle going forward.

    — Anubhav Gupta

Market Conditions

  • Steel Prices Market Conditions · November, December · High confidence stabilized
    November, December, we are assuming stabilized steel pricing.

    — Anubhav Gupta

Business Model

  • TMT Business Model Business Model · ongoing · High confidence Royalty income model
    So TMT, we have changed the model. Like now, we are only telling the franchisee partners to produce and sell TMT on their own. We just need a royalty for SG brand.

    — Anubhav Gupta

Volume

  • Service Center Volume per month Volume · monthly · High confidence 10,000 tons

    Previously 5,000 tons → 10,000 tons

    So I mean, service centers, one can assume 10,000 tons per service center on a monthly basis. So far, like in first half, we have done 0.5 million in B2B metal trading and service centers. So it should be much higher than what we did in first half.

    — Anubhav Gupta

Volume Growth

  • B2B Volume Growth Volume Growth · ongoing · High confidence 15-20%
    But whatever volumes we are doing currently, we should maintain we should be able to maintain those with 15%, 20% volume growth.

    — Anubhav Gupta

What to watch in Q3 FY26

Q4 FY26 EBITDA Performance

Q4 FY26
Current Q2 EBITDA margin 1.6%, H1 EBITDA INR64 crores. Q3 expected similar to Q2.
Target Closer to original full-year guidance, showing 'true color' of SG Mart's potential.

Why it matters

Verifies management's confidence in new businesses and the impact of clearing one-off expenses for a 'clean slate'.

So Q4 should be the exit run rate we should look at, and that's our milestone as management that, that should be the exit run rate, which will give the true color of what SG Mart can do.

Risks & concerns

  • Steel Price Volatility

    high

    Steel prices declined by INR3,000 per ton in Q2, leading to inventory losses and impacting profitability.

    Management acknowledged

  • Guidance Miss

    high

    The FY26 EBITDA target of INR200 crores is now difficult to achieve due to Q2 underperformance and Q3 one-off expenses.

    Management acknowledged

  • Macroeconomic Slowdown

    medium

    Heavy monsoons and global trade uncertainty impacted steel prices and overall activity in Q2.

    Management acknowledged

  • Impact of One-off Expenses

    medium

    Pre-booking all branding expenses and upfront costs for new profiling businesses depressed Q2 EBITDA and will continue to impact Q3.

    Management acknowledged

  • Demand Uncertainty

    medium

    While steel supply is good, demand remains a factor, especially with global trade uncertainty and specific sector slowdowns (construction, auto, white goods).

    Analyst acknowledged

Q&A highlights

4 direct, 1 evasive
FY26 EBITDA Target Revision Direct
So Vivek, definitely, it is now difficult to achieve INR200 crores EBITDA for FY '26 because Q2 was pretty much below expectations in terms of margin spreads. And like I said, in Q3 also, we would like to complete all the booking of advertisement expenses.

Management admitted the FY26 EBITDA target is no longer achievable due to Q2 underperformance and Q3 one-off expenses, signaling a significant revision to prior guidance.

Asked by Vivek Patel

Capital Allocation Strategy and Interest Cost Partial
So this year, we do whatever short of INR200 crores and INR50 crores, we could use our cash on books. But next year, EBITDA will jump, and that will be linear. So from FY '26 to FY '28, if you see, the EBITDA for the cumulative 3 years will match the capex spend for business expansion.

Analyst questioned the impact of capex on interest costs and other income. Management clarified funding from internal accruals and projected future EBITDA growth to cover capex, but did not directly address the interest cost offset.

Asked by Vivek Patel

Guidance Consistency and Pre-booking Expenses Evasive
So Garvit, see, I mean, there are 2 things. So this fall on the decision to prebook branding expenses, yes, this was not planned when we had the last call. Second also is the fact that steel prices fluctuation, which had dropped by like INR3,000 per ton plus, that also came from nowhere, okay?

Analyst challenged management on why the decision to pre-book expenses was not known during previous guidance. Management acknowledged the miss but attributed it to unexpected steel price drops and a strategic decision to clear the slate for Q4.

Asked by Garvit Goyal

Quantifying One-off Expenses Partial
Like, difficult to quantify, but it is more than 50 bps of total revenue.

Analyst sought specific quantification of inventory losses, ad expenses, and new business upfront costs. Management provided a broad estimate (over 50 bps of total revenue) but avoided precise figures.

Asked by Rahul Kumar

Decline in B2B Metal Trading Segment Direct
Yes. So what is happening is that the service center business is taking over sales from B2B metal trading. That is number one. Because whatever steel we get, we want to process it and sell it with a better margin, with better return profile.

Analyst questioned the decline in the B2B segment. Management explained a strategic shift to prioritize higher-margin service center processing over pure B2B trading.

Asked by Aryamaan Agarwal

Supply vs. Demand as Driving Force Partial
So demand here is that -- I mean, see, there's a lot of shift happening from unorganized to organized. Right now, there are small traders, unorganized traders, which are in the market. So SG Mart will go and take market share from them.

Analyst probed whether supply or demand was the primary driver for SG Mart's performance. Management emphasized taking market share from unorganized players when supply is good, implying both factors are relevant.

Asked by Akhilesh Kumar

Service Center EBITDA Realization Direct
Only inventory loss, Mr. Pradhan.

Analyst asked for a breakdown of the INR500/ton drop in service center EBITDA. Management attributed the entire drop solely to inventory losses, providing a clear, albeit concerning, reason.

Asked by Hitaindra Pradhan

Confidence in Q4 Normalization Direct
Fair enough. So again, like in month of October also, there is a decline in steel prices. November, December, we are assuming stabilized steel pricing. So whatever hit will take for month of October. Second, like some further marketing branding advertisement expenses were being amortized. So we want to clear that. And third, the opex for open structures, that will also get we will be done with because the business will start throwing in real INR2,000, INR3,000, INR4,000 per ton of EBITDA, which you will see in quarter 4 from January onwards.

Analyst questioned the repeated promise of normalization, previously for Q3, now for Q4. Management provided specific reasons for confidence in Q4, including expected steel price stability, cleared marketing expenses, and new businesses contributing.

Asked by Riddhesh Gandhi

3 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview and Macro Headwinds

SG Mart experienced a challenging Q2 FY26, marked by a slowdown in macro activity due to heavy monsoons and global trade uncertainty. This environment led to a significant decline in steel prices, falling by INR3,000 per ton. Despite these headwinds, the company reported a robust revenue exceeding INR1,700 crores, representing an almost 50% quarter-on-quarter increase. However, H1 FY26 revenue remained flat year-on-year, and the Q2 EBITDA margin stood at 1.6%, below expectations.

Impact of One-off Expenses on Profitability

Q2 profitability was significantly impacted by two main factors: inventory losses resulting from the sharp decline in steel prices, and the strategic decision to pre-book all branding expenses. Previously amortized over 24 months, these branding costs were fully recognized in Q2, with further booking expected in Q3. Additionally, upfront marketing and manufacturing costs for new profiling businesses also contributed to the depressed EBITDA. Management anticipates Q3 performance to be similar to Q2 due to these ongoing one-off expenses, aiming for a 'clean slate' by Q4 FY26.

Strategic Shift Towards Value-Added Businesses

SG Mart is actively transitioning its business mix towards higher-margin, value-added segments to mitigate the impact of steel price volatility. The service center business, which involves processing and selling metal products, contributed 50% to Q2 revenue and saw a 35% QoQ volume increase. The new renewable structures vertical contributed 4% to revenue and boasts an order book of INR260 crores, with its contribution expected to double in Q3 FY26. These segments offer significantly higher EBITDA per ton (INR1,500-2,000 for service centers, INR2,000-3,000 for renewables) compared to B2B metal trading (INR500-1,000).

Service Center Network Expansion and Utilization

The company currently operates 7 service centers (5 owned, 2 leased) and plans to add 4-6 new centers annually, with one new center in Jaipur slated for Q4 FY26. The strategy involves leveraging existing service center infrastructure to set up profiling machines for new product lines like cable trays and solar struts, thereby maximizing asset utilization without substantial additional capex. Management noted that some existing service centers are already exceeding volume expectations, processing over 12,000 tons per month against an initial target of 5,000 tons.

Revised FY26 Outlook and Long-term Confidence

Management acknowledged that the initial FY26 EBITDA target of INR200 crores is now difficult to achieve due to Q2 underperformance and the impact of one-off expenses. However, they reiterated confidence in achieving their long-term ROCE target of 20-25%. They expect the true profitability and strength of the new business models to become evident from Q4 FY26, driven by anticipated steel price stabilization and the full contribution of the value-added segments after the short-term impacts subside.

Working Capital Management and Inventory

As of September 30, 2025, SG Mart's working capital days stood at 22, a slight increase from Q1, attributed to initial inventory for the new profiling business and international trading. Inventory days were 27. Management aims to maintain working capital days within a range of 15-25 going forward. The company faced inventory losses in Q2 due to the unexpected sharp decline in steel prices, which impacted the service center business where raw material inventory is held.

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