I am tracking this business for some time.I have started building position in the counter now. In the Q4 few things happened which was a bit of positive according to me:
The no of service centres that they were planning to open per year is now reduced by half( from 10-5).The volumes that one service centre can handle is higher than they expected.This reduces the requirement of capital expenditure needed by them.This is a new area for them and theya are learning and evolving.
They highlighted that all the capex that they plan to do for next few years will be from internal accruals + the cash already on balance sheet.
There was a business of TMT, which they have moved to royalty based model ( decreases revenue but keeps the bottom line same, leading to better OPM).This is a small business but the intent of management to structure business in such a way which gives a better OPM.Maket values a business with 2.5% margin and 4-5 % margin differently.
They are investing in marketing and said it will come down post 2-3 years.Again a lever of margin improvement
I sense a basic level of POC for the business model is done, now they are on a strong footing to accelerate smoothly for next 2-3 years( with ROCE threshold of 25%).Guided for 400 cr EBITDA by FY27
In the guidance they have not include the contribution of the business of solar that they have entered into recently
The guidance part is also improving as they understand that revenue guidance shouldnāt be given in such businesses and now they are talking about volumes and EBITDA.
The TAM is very large here and only hindrance is execution .The management to me looks like they can execute.The direction is important to me than velocity
9)the inframarket IPO ( which is being planned at 3-5 billion dollars) can rearate this.
If this business will grow with high pace YOY, this wonāt be valued cheaply inspite of the margin profile ( Because of TAM + Management profile).
Risks are pretty obvious:
Also valuation wise of Business in unlisted has achieved good valuations funded by rounds by tiger global, SoftBank, Zodiac Capital. Comparing it with SG mart makes sense coz they are also positioning themselves at an earlier growth stage. This could lead to appreciation given the current valuations and confidence here about ebitda and other pieces.
Indiaās steel capacity is projected to increase by 70-80% between 2023 & 2027, providing a robust supply for SG Martās operations.
The Indian real estate sector is poised for significant expansion, expected to reach US 1 Trillion in 2030.
The relatively low penetration of B2B marketplaces in India (~1% vs. 20% in China/USA) & the digital transformation aspirations of over 70% of 40Mn registered MSMEs present a monumental growth opportunity for SG Mart.
I do not think the question is about growth. The opportunity for growth is huge. The question is, is it already priced in? What is the execution risk? Multiple deep-pocketed players have come in now, as listed in the thread earlier.
My thought process to understand the demand/market opportunity:
What are these players trying to achieve:
a. capture the market share from dealerships/distributors
b. capture the gross margin leakage from manufactures to end users ~10-15%
c. with tech, economies of scale & optimized logistics improve net margins
Market size: (pls note this data is using AI prompts)
a. Total Finished Steel Consumption : 136.25 m.t as on 2024 reports
b. We have to reduce consumptions by large OEMs which are primarily auto industry who might be procuring directly from manufactures - 7.8 m.t
c. Total steel consumption through dealers/distributors : 128.45 MT (derived estimates)
d. At current average steel price of ā¹47,880 per ton = INR 6,15,000 Crs / USD 73 b
If the above data is correct or even partially correct!!, there is enough room for multiple players to exist at the same time.
Happy to be corrected & learn!
I am unable to add a link to this paywalled article because for some strict (though maybe flawed) filtering, our forum platform is not allowing any posts with a substring such as t dot co or bit dot ly.
Will be interesting to hear the views of the management on these developments as some or all of them could be their vendor partners.
You are under the assumption that Birla Pivot and JSW One MSME donāt have offline presence. Their offline presence will be even greater than SG mart.
JSW One is doing ~10k CR GMV while Birla has started with 1k CR in 1st year. The competition is heating up and will surely eat into the margins if steel prices go down again and might also impact working capital cycle.
Again, coming back to the same old point of there being no moat in this business aside from capital which is easily dwarfed by larger corporates.
Still the opportunity size is huge and there should be growth for the next 4-5 years.
In my opinion, future margin expansion and earning growth will be from Service centers (value addition centers) success by SG Mart. Hence, better to keep eye on success of this line of business.
Disc- Invested and added @ 300 level
First full year fy2025 operations successfully laid foundation in procurement & supply chain.
Renewables segment launched in Q1FY26 having 283 cr of order book.
5 service centres are now operational and two more leased in Ahmedabad and Indore.
long term focus on pan India network and plan for expansion into green infrastructure in solar structures.
They are expecting recovery in Q2FY26.
Profits are good comparing YoY if not sales. What i see is āCost of materials consumedā component which was NIL last quarter previous year and this time it was significantly high.
Pathetic numbers, in last concall management so confidently said, we will have 50 crores of PAT in Q1ā26 they are not even near it.. Why canāt they just say we donāt have any guidance and just give the updates on normal business.. I have been listening the same excuses from last 3 quarters in every concallā¦
Peer Comparison: SG Martās growth potential and valuation opportunity
1. Of Business
Revenue Scale: OfBusiness has scaled aggressively with revenue reaching ā¹20,000 crore in FY24 , up from ā¹15,000 crore in FY23 and ā¹7,000 crore in FY22 . This remarkable growth has been supported by strategic acquisitions and diversified expansion.
Valuation: Valued between $7-9 billion in the unlisted market, OfBusiness achieved a $5 billion valuation in its 2021 Series G funding round [by Tiger Global, SoftBank , Zodiac Capital ] when it raised $325 million .
Comparison with SG Mart: SG Martās FY24 revenue was ā¹2,683 crore , positioning it at an earlier growth stage. While OfBusiness has already scaled significantly, SG Mart trades at a much lower valuation of ā¹4,300 crore (approx. $500 million) , indicating substantial room for appreciation as it scales its revenue and service infrastructure.
2. Infra Market
Revenue Growth: Infra Market has grown its revenue base from ā¹350 crore in FY20 to an impressive ā¹11,846 crore in FY23 . This growth trajectory reflects rapid adoption and expansion within the construction and infrastructure segments.
Valuation: Currently valued at $2.6 billion , InfraMarketās rise has been fueled by substantial funding rounds from prominent investors like Accel, Tiger Global.
Based on above at what valuation we can expect SG martā¦think of
Caution and Disclosure : I am not recommending buy or sell ā¦Please do your due diligenceā¦Not responsible for any buy or sell action
Comparing private market valuations with public market valuations is not a direct apples-to-apples comparison. Private marketsā valuations tend to be opaque, and all involved are incentivized for higher and higher valuations with little public scrutiny. Public markets are much more harsher and are scrutinized in greater detail. Only after listing and some listing history will we able to know the true value Of-Market and Market.infra viz a viz their current private market valuations.
Management guided for 50cr profit qtly, and 200cr profit for fy26. And delivered 32cr in 1st qtr, from that point quite disappointing result.Few points stand out to me
1> BtoB metal volume degrown more than 50% in this qtr,{low margin business} and
2> network service vol almost flat q on q {high margin} and
3> distribution segment rev grow by 50% q on q
so product mix changes lead to margin improvement {from 2.4%to 3.1%}
4> Solar structure , management said 50000T secured order for fy26 , they did 1000T in this qtr means rest 49000T to be done in next 3qtrs.
Another important factor to me is fcf 302cr this qtr. And cash bal more than 1000cr.
So PAT NUMBERS DISAPPOINT ME BUT OTHER OPERATIONAL METRICS INDICATE SOMETHING ELSE. INVESTED BIAS.YOU KNOW MY ENGLISH SKILL.
This is done via Chatgpt, manytime AI hallucinate and provide wrong info. Pl draw attention if any field is captured wrongly.
Also wondering if some vp friend do the same exercise with latest results (Am free user of chatgpt and some functionality stopped for 24 hours). Thx
Entered SG Mart today with moderate quantity.
The results donāt meet the expectations and thatās why available at discounted price. However, in commodity business quarter to quarter fluctuations should be ignored and overal business sustainability and growth have to be watched on a full year basis.
Given the runway guidance provided by the management and track record, things should look better in the long run.
The company is trying to formalize an informal sector so it will take some time to streamline some things. No doubt the business have no moat and it is betting on the volume play and brand strength which should give operational leverage in the long run. Also, if the company can achieve committed volume growth in future, it will act as a moat.
