Detailed Narrative
Q3 FY26 Financial Performance Overview
Steelcast reported a moderate degrowth in revenue from operations by 3.08% to INR 97.4 crores in Q3 FY26, compared to INR 100.5 crores in Q3 FY25, primarily due to softer demand and geopolitical uncertainties in export markets. Despite this, the company demonstrated strong profitability, with EBITDA growing 6.81% to INR 31.21 crores and EBITDA margin expanding by 297 basis points to 32.04%. PAT also increased by 7.17% to INR 20.59 crores, achieving a margin of 21.14%.
Strategic Diversification and New Product Development
To de-risk the business and drive future growth, Steelcast is actively pursuing geographic and sectoral diversification. The company has developed 56 new parts in FY25, 46 in FY26, and plans 42 more in FY27, totaling 144 new parts expected to transition to serial supplies. Initial orders for new components in Ground Engaging Tools and Construction segments commenced in Q2 FY26, and the company is working with an Israeli firm on combat vehicle parts, expecting serial supplies soon.
Capacity Utilization and Long-Term Growth Outlook
Current capacity utilization for Q3 FY26 stood at 46%. Management projects this to increase to 58% in FY27 and aims for approximately 90% utilization (26,000 tons) by FY29, driven by the new parts coming online. The company is confident of sustaining a 20% CAGR over the next three years, building on a 24% CAGR achieved over the past four years, and expects to deliver 11% growth in FY26 over FY25.
Margin Stability and Cost Management
Despite revenue fluctuations, Steelcast expects margins to remain stable at current levels, with a long-term sustainable margin of 27.5-28%. This is supported by a sales price variation formula that ensures pass-through of raw material cost changes and ongoing internal cost reduction programs. These programs, along with forex gains and purchase price variance, contributed INR 3.41 crores to profitability in Q3 FY26.
Capital Expenditure and Liquidity Strategy
Steelcast plans a capex of INR 35 crores in FY27 for new space and balancing equipment to support new product mix and increased output. The company also has a 2.4-megawatt hybrid power plant project expected to be commissioned by June 30, 2026, projected to save INR 3.5-4 crores annually. With free reserves of INR 110 crores, expected to grow to INR 125-130 crores by year-end, the company will decide on further capex for 90% utilization once the annual utilization rate reaches 75%.
Export Market Dynamics and U.S. Tariff Response
While Q3 FY26 saw moderation in the U.S. market due to tariffs, Steelcast's products remain competitive, being 5-13% more cost-effective than Chinese offerings in key categories. The company is not reducing prices due to U.S. tariffs, which have an additional impact of 50%, and is actively diversifying its export base. It is targeting two new countries to expand its reach from 16 to 18 countries, with EU exports targeted at 20% for the next financial year.