Steelcast Ltd (BOM:513517) (Q1 2027) Earnings Call Highlights: 17% Revenue Growth and Ambitious ...

• Energy costs remain elevated due to geopolitical tensions and sustained pressure on fuel prices, impacting input costs.

• Natural gas prices have surged about 50-55% compared to February-end levels, and the company is still evaluating whether to transition to electricity-based systems.

• The U.S. railroad segment, previously a growth opportunity, has been deprioritized, and no timeline is given for re-engaging with it.

• Defense business is being given low priority (currently ~1% of sales) due to better opportunities elsewhere, limiting potential in this high-growth sector.

• Inventory levels have risen due to production ramp-up, which may temporarily tie up working capital before converting to sales.

• The company faces a one-quarter lag in passing on input cost increases, which could pressure margins in the short term.

• Management is conservative on guidance, initially stating 25% growth but later admitting 30% is possible, which may create uncertainty for investors.

• The new Greenfield Foundry will not contribute significantly to revenues until FY '29, meaning the full benefit of the CapEx is delayed.

• Export mix is expected to decline slightly to 47% in FY '27 (from 49-50% in FY '26), potentially reducing exposure to higher-margin overseas markets.

• The company's focus on non-defense sectors means it may miss out on India's defense manufacturing push, which could be a long-term growth driver.

Q & A Highlights

Q: Can you clarify the expected volume growth for FY '27, given that the 63% capacity utilization target implies more than 18,000 tonnes, which is higher than the 25% growth guidance? A: Chetan Tamboli, Executive Chairman and Managing Director, clarified that the 25% figure was a conservative estimate. Given strong customer indications, a 30% volume growth is a distinct possibility for FY '27.

Q: What is the timeline and revenue potential for the new INR 120 crore Greenfield Foundry? A: Chetan Tamboli stated the plant is targeted for commissioning by 31st March FY '28, with additional volumes expected in FY '29. The peak revenue potential from this new facility is estimated at approximately INR 300 crores.

Q: How will the increase in input costs and fuel prices be managed, and what is the expected impact on margins? A: Chetan Tamboli confirmed that the company has a sales price variation formula with all customers, allowing it to pass on all increases in major raw materials. The major price correction is effective 1st July, and with operating leverage kicking in, EBITDA margins could improve by 150-200 basis points to around 28.5%-29% for FY '27.

Q: What is the current order book, and what is driving the confidence for strong volume growth? A: The current order book stands at INR 140 crores, representing roughly 3-4 months of firm business. Chetan Tamboli cited strong indications from domestic and export customers, elevated commodity prices, increased infrastructure spending in India and abroad, and investments in sectors like railways as key drivers for growth.

Q: What is the current status and future outlook for the Ground Engaging Tools (GET) segment? A: GET currently contributes less than 1% of revenue. Chetan Tamboli stated that in FY '26, GET was about 1% of sales, and this is expected to grow to 3.5% in FY '27 and reach approximately 6% by FY '29 as new parts are approved and go into serial supply.

Q: What is the company's strategy regarding the U.S. railroad and defense sectors? A: Chetan Tamboli revealed that the company has shifted its strategy and is not currently pursuing the U.S. railroad market, focusing instead on better opportunities in other industrial sectors. Similarly, defense is being given low priority (currently ~1% of revenue) due to better pricing and demand in other sectors, though the Israel defense component trials are ongoing.

Q: Can you provide a breakdown of the revenue contribution by industry sector and geography? A: For the current year, mining is expected to be ~27% of sales, earthmoving ~43%, and construction ~15%. Exports are expected to be around 49-50% of revenue, with the U.S. and Germany constituting about 70% of exports. The company has diversified from 2 export geographies 10 years ago to 16 countries now.

Q: How will the company fund the INR 120 crore CapEx, and is there a plan for a rights issue or bonus issue? A: Chetan Tamboli stated the company is debt-free and will fund the CapEx entirely through internal cash accruals, as it already has sufficient reserves. He noted that a rights issue would dilute EPS and is not needed. He agreed to take the suggestion for a bonus issue to the Board of Directors.

Q: What is the company's plan regarding renewable energy and transitioning to electricity-based systems? A: Two renewable projects (a 2.4 MW hybrid wind-solar plant and a 1.4 MW solar plant) are under implementation and expected to be commissioned before 31st December '26. The company is also considering transitioning from natural gas to electricity over the next 2-3 years, which could lead to cost savings at current gas prices.

Q: What is the expected contribution from new parts developed over the last 18-24 months? A: Chetan Tamboli indicated that over the next 2-3 years, approximately 20% of revenues are expected to come from new parts, with the remaining 80% from existing parts due to increased demand. The company has developed more than 100 new parts in the last 18-24 months that are now entering serial supply.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .