Management did say both q2 and q3 will be similar in numbers. Bad results but nothing out of the ordinary. Now I will either wait for Q4 results or my exit price whichever comes first as there are better opportunities. Have learned few important lessons with this stock.
Disc: holding and this is my biggest bet in pf.
Con call - Management is very confident about EBITA and expecting good growth now onwards as steel prices also recovering and good margin from service centres business.
Good new products coming from service centres having good margin and stable earnings
Took the help of YouTube AI to summarize the video and did some prompting
Summarize the video
SG Mart Limited hosted an earnings call to discuss its Q3 FY26 financial results (0:01). Despite a tough environment with declining steel prices and soft demand (1:30), the company reported a 9% increase in sales volume quarter-on-quarter (1:50). The actual business EBITDA for Q3 was ₹40 crore, despite an inventory loss of ₹20 crore due to sharp corrections in steel prices (2:01).
Key business segments and future outlook:
Service Center Business SG Mart currently operates four service centers in India and one in Dubai, with five new centers planned for FY27 (3:40). The company aims to have 20 service centers operational by early FY29 (4:06). Despite lower EBITDA per ton in Q3 due to price pressure, the company expects improvement in Q4 (5:01).
B2B Metal Trading This segment achieved a volume of 125,000 tons in Q3 (5:53) and similar volumes are expected in Q4 (6:09). EBITDA spreads are projected to improve (6:12).
Renewable Structures Sales volume for solar structures reached 17,000 tons in Q3 (7:05) and is projected to increase to 25,000 tons in Q4, with improved EBITDA spreads (7:08). The company has a healthy order book and is confident in continued growth (7:37).
Open Profile Business SG Mart is expanding into new products like residential rooftop structures, cable trays, and racking structures, which are sold through its group distribution network (7:58). This segment is expected to contribute significantly to volume and margins in Q4 (9:07).
The company is confident in achieving ₹60 crore in business EBITDA in Q4 and reaching a quarterly run rate of ₹80-85 crore in FY27 (3:01). The overall business plan for FY27 projects an EBITDA of ₹350 crore (14:20), with potential for higher growth if steel prices remain stable or increase (14:31). The management is bullish on the company’s long-term prospects (50:15) and is taking measures to mitigate risks related to steel price volatility by maintaining minimum inventory levels (47:17).
Why expand service centers?
SG Mart is expanding its service centers because the existing centers have consistently delivered strong performance (21:15). The company aims for an 8,000-9,000 tons monthly volume from each service center with an EBITDA of ₹2,000 per ton, which helps them achieve a desired Return on Capital Employed (ROC) of 25-30% (20:59). This consistent achievement has given the management the confidence to aggressively pursue establishing 20-plus service centers as soon as possible (21:18).
How does steel price volatility impact?
The video states that steel price volatility has a significant impact on SG Mart’s financial performance.
In Q3 FY26, a decline in steel prices led to a ₹20 crore inventory loss (2:14), as there was a sharp correction of ₹2,500 to ₹3,000 per ton (2:26).
Declining steel prices also created pressure on sales and a lack of demand, leading to lower EBITDA spreads in both the service center (5:09) and B2B metal trading businesses (6:19). The company had to offer discounts to customers (5:18).
The speaker notes that a sharp correction in steel prices is the “only risk” to their projected numbers for FY27 (14:32), although they don’t expect it to hurt their P&L significantly at current price levels (14:45).
However, they mention that the impact from steel prices “keeps on reducing” as the company’s absolute EBITDA grows (15:17). This is because when the absolute EBITDA is a larger number, steel price fluctuations do not impact the P&L as badly (15:39).
To mitigate this risk, the company aims to keep inventory levels minimum and does not speculate on steel price movements, as it’s not part of their business plan (47:17).
The company operates on a pass-through model, where their product prices are linked to domestic or international steel prices (47:52).
What caused Jaipur delays?
The video states that the Jaipur service center operations were delayed by a couple of months from their original Q4 timeline (19:33). This delay was due to excessive rains in the area, which lasted until November and impacted civil work for a few months (19:42 - 19:49). The company expects operations to start by mid-March (19:55).
How is business AITA calculated?
The video indicates that business EBITDA is derived by adjusting the reported EBITDA for certain factors.
The speaker explains that while the reported EBITDA for Q3 was ₹17 crore, the actual business EBITDA was ₹40 crore (2:01 - 2:10). The difference is primarily attributed to:
An inventory loss of approximately ₹20 crore due to the softness and sharp correction in steel prices (2:14 - 2:32).
Minor ₹2-3 crore business expenses incurred to build the renewable structure and open profile business (2:35 - 2:43).
Essentially, the business EBITDA reflects the operational performance before factoring in these specific inventory losses and certain new business related expenses. The speaker also notes that multiplying the revenue volume for each of the four business segments by their respective EBITDA per ton provides the total business EBITDA (9:26 - 9:34).
How will FY27 EBITDA reach 350cr+?
SG Mart Limited aims to reach an EBITDA of ₹350 crore plus for FY27 (14:20-14:24) by growing its four core business segments. The company breaks down its projected EBITDA contribution as follows:
Service Centers (India & Dubai):
India: With five new service centers becoming operational in H1 FY27, the company anticipates a full-year volume of around 750,000 tons (11:13 - 11:21). At an expected EBITDA of ₹2,000 per ton, this segment is projected to contribute ₹150 crore (11:25 - 11:31).
Dubai: The Dubai service center is expected to contribute ₹50 crore for the full year, generating around ₹10-12 crore per quarter (12:01 - 12:13).
Total Service Centers: This sums up to ₹200 crore of EBITDA (12:16 - 12:17).
B2B Metal Trading:
Solar Structures and Other Structures (Trade Channel):
The company has an annual capacity of 250,000 tons for solar structures and 250,000 tons for other structures (13:14 - 13:26), totaling 0.5 million tons of annual capacity.
For solar structures, the assumed volume is 180,000 tons for the full year (13:35 - 13:44).
For other products sold through the trade segment, the company expects to do around 200,000 tons (13:57 - 14:02).
Collectively, these structures are expected to contribute a total volume of 350,000 to 400,000 tons (14:05 - 14:11), generating an EBITDA of ₹4,000 to ₹5,000 per ton, which can give another ₹120 to ₹150 crore (14:11 - 14:17).
Combining these projected contributions from each business segment leads to the total ₹350 crore plus EBITDA target for FY27 (14:19 - 14:24). The company is confident in these numbers, noting that the impact of steel price fluctuations will also reduce as the absolute EBITDA grows (15:17).
How does product mix affect margins?
The product mix of SG Mart’s business segments significantly affects its overall margins, as different segments have varying EBITDA per ton targets, contributing to a blended average.
The speaker explains that one should not look at the blended EBITDA per ton (22:14 - 22:17), but rather at how each business vertical is performing individually (22:21 - 22:24). While the blended EBITDA per ton may appear to be around ₹1,800-₹1,900 (22:30 - 22:32), there is significant scope to increase margins in the renewable structures and other profile structures businesses (22:37 - 22:42).
The company’s clear targets for each segment’s EBITDA per ton are (23:27 - 23:31):
B2B Metal Trading: Expected to generate ₹1,000 per ton (22:56 - 23:00).
Service Center Business in India: Expected to generate ₹2,000 per ton (23:00 - 23:04).
Service Center Business in Dubai: Expected to generate ₹5,000 per ton plus (23:04 - 23:09).
Solar OEM Business (Renewable Structures): Expected to generate ₹3,000 to ₹5,000 per ton (23:13 - 23:18).
Profile Business (Trade-led sales): Expected to generate upward of ₹5,000-₹6,000 per ton (23:22 - 23:27).
These different margins for each segment mean that as the share of higher-margin businesses, such as renewables and the new trade-led products, increases (32:40 - 33:40), the overall profitability is expected to improve (6:46 - 6:51). The company focuses on the Return on Capital Employed (ROC) at the overall company level rather than just the blended EBITDA per ton (23:45 - 23:51).
Why target 20 service centers?
The video states that SG Mart is targeting 20 service centers because the company has gained significant confidence and conviction over the past three to four quarters (21:18 - 21:20).
This confidence stems from consistently achieving:
A monthly volume of 8,000-9,000 tons from each service center (20:59 - 21:03).
An EBITDA of ₹2,000 per ton (21:06 - 21:09).
These performance metrics ensure that the service centers achieve the company’s desired Return on Capital (ROC) of 25-30% (21:09 - 21:13). Based on this consistent success, the company decided in January 2026 to “go all out” and establish these 20 plus one service centers as soon as possible (21:26 - 21:32).
What’s the Dubai service center advantage?
The video indicates that the Dubai service center provides a significant advantage to SG Mart due to its superior EBITDA spreads compared to those in India (11:55 - 12:01).
Specifically:
The Dubai service center generates around ₹5,000 per ton plus in EBITDA (23:04 - 23:09), which is considerably higher than the ₹2,000 per ton expected from service centers in India (23:00 - 23:04).
It currently processes about 15,000 tons of monthly volume (11:50 - 11:55) and is projected to contribute ₹50 crore to the full year EBITDA (12:01 - 12:13).
How do they handle debt?
The video discusses SG Mart’s approach to handling debt, focusing on its short-term borrowings and the allocation of its credit limits.
Short-term borrowings drastically reduced from approximately ₹700 crore in FY25 to ₹130 crore by December (24:00 - 24:07). However, the interest cost remained in the range of ₹12 crore in Q1 and Q2, increasing to ₹17 crore in Q3 (24:07 - 24:14). The annual interest cost is accounted for at ₹13-14 crore for the whole year, annualizing to ₹50-55 crore (24:32 - 24:41).
The company has taken loan limits of ₹740 crore from banks (24:44 - 25:05).
Allocation of these limits:
50% is used for bill discounting (25:08 - 25:11, 27:20 - 27:23) because the company sells on a cash-and-carry basis and discounts receivables from various banks (25:11 - 25:17).
40% is used for the import of steel (27:31 - 27:36).
The remaining portion covers bank charges and other expenses (27:36 - 27:42).
The gross debt on the books was ₹134 crore (25:19 - 25:26), which the speaker states is accounted for in the above breakdown (27:48 - 27:51).
The speaker also mentions that the company maintains working capital days (16:13 - 16:17), which stood at 27 days as of December 31, 2025 (16:17 - 16:20). This was slightly higher due to advanced payments made to steel suppliers to book steel ahead of anti-dumping duties (16:24 - 16:43), but it is expected to improve by March (16:43 - 16:49).
After my initial outrage at the numbers, I went back to the concall and analyzed with whatever little understanding I have. Writing here to clear my mind:
Management says they are not disappointed by the bad results in a tough environment.
Sales volume has increased 9% QoQ. Took inventory loss of 20 crore resulting in 17 crore EBITDA. Q4 EBITDA guidance is 60 crore and eventually to 80 crore per quarter in FY27. 5 service centers currently operational with plan to add 5 more in FY27. Service center business is as follows:
Q3 total volume from SC was 163k tons with average EBITDA of 1500 rs per ton. Q4 to have similar volume with 2000 rs per ton EBITDA. This is 32 cr of EBITDA
B2B metal trading saw volume of 125k tons. EBITDA was 500-600 per ton. Q4 to have similar volume with EBITDA at 900-1000 rs per ton which translates to 11 cr in EBITDA.
Renewable Structures did around 17,000 tons of sales volume. All costs are incurred at this point. Q4 will have 25k tons with EBITDA of 4000 rs per ton which should translate to 10 cr.
Management talked about a new fourth arm of the business (calling this other structures) where they sell under APL Apollo brand and leverage group distribution. No sales in Q3 but Q4 to have 10k tons of volume with 6000-7000 rs per ton. This should translate to 6 cr EBITDA at lower band.
All in guided EBITDA for Q4 is 60 cr. This translates FY26 EBITDA to 140 cr (40% growth).
Now the guidance for FY27 is as follows:
Service center business to see 750k tons of volume. With 2000 rs of EBITDA the total amount is 150 cr. This is more than FY26 EBITDA from just one part of the business. Furthermore, Dubai service will separately do 50 cr of EBITDA due to better margins.
B2B Metal Trading business with same 500k tons of volume and EBITDA of 800-900 per ton gives 50 cr.
Solar structures and other structures capacity is 500k tons. Assuming they do 400k tons for the full year with blended margin of 4000-5000 per ton. EBITDA guidance from these two-part combined is 120-150 cr.
Hence total EBITDA guidance for FY27 is 350+ cr which will be 150% jump from FY26. PAT guidance is of 250 cr.
Risk to this is steel price fluctuations which are happening from past two years. Management said with increasing EBITDA the fluctuations won’t impact the bottom line much. As per management that large number value is 500 cr.
WC stood at 27 days and will improve going forward. At 140 cr EBITDA we have 40% growth in FY26. Management continues to maintain 50% CAGR guidance despite this fact. Current cash stands at 790 cr which will gradually decrease due to upcoming CAPEX. Expect other income to go down as well.
Now here is what I make of all this and first the bad news. Management is quite confident about 350 cr EBITDA next year but I should take this very cautiously. In the calculations of SC business they are taking 2000 rs per ton but who is to say they don’t suffer one or two more inventory losses in the future. The near-term risk is purely based on steel prices which are incredibly hard to predict. 50 cr out of the 350 is dependent on Dubai SC alone. If that business takes hit due to xyz reason then these numbers are likely to go down. We are living in unprecedented times as far as commodity prices are concerned. I personally would expect a lot of fluctuations going forward. Couple of bad quarters next year can easily dent the EBITDA by 100 cr easily. Only way to avoid these fluctuations, as per management, is to triple the business which is a long way from now. Do I think they will show growth next year? Absolutely. Will it be ₹350 crore? Hard to say. Even with 250 cr EBITDA they will easily meet the 50% CAGR then what is the point of giving aggressive guidance again!
The good news are few silver linings in the form of new products, leveraging APL Apollo brand and distribution as well as support to the share price by promoter group. Rohan increased stake at 333 and expect this range to show more support.
Disc: cautiously optimistic and holding the current position.
They will still suffer inventory losses even if they grow by 10x simply as you can easily validate by looking at Japanese sōgō shōsha and UK steel trading companies with operations in almost all steel producing countries.
This is the nature of the industry and they have been making bold claims to prevent margin deterioration and high sales growth for past 2 years which turned out to be wrong again and again.
Disc: Exited today post the run-up. Invested because of the steel story - no steel trading companies, steel prices bottoming out, management track record with APL Apollo, etc but I went through all guidance with a clear mind and found a heavy sunk cost fallacy bias in my current thesis.
Phew! Thought I would become a bag holder.
I appreciate your input and had the similar thought process after the results. However, I think this is not the right time to exit. My reasons are:
The ideal time to reconsider would be Q4FY26 results.
Disc: holding with avg price of 390. No recommendation and I may change my view tomorrow if needed.
Edit: avg price is 390 not 490 as mentioned earlier.
I feel the opportunity cost of holding on to SG Mart is quite high. The market seems to be pricing in a decent Q4 already. At the same time, many smallcaps are trading at very low multiples, having a track-record of historical execution and reassuring management guidance.
If the thesis hinges on SGMart leveraging the Apollo brand, then it has been already doing so, yet overpromising and under-delivering. The Apollo factor also had ~2+ years to be priced in, and hasn’t been able to rescue the stock.
Also, I feel promoter supporting the price isn’t a strong enough reason for maintaining a long-term holding. Price is anyways 25% above the “floor” price of ₹333 at which Rohan bought..
Agreed mostly. I have cash for other opportunities. Hence, don’t mind waiting another 2 months but others should take own call.
This scripe has given me some very valuable lessons. Stock price is making fresh 52W highs every week from past one month further validating ‘bhav bhagwan che’ statement.
Also talked to few steel traders and there is general sentiment steel prices have bottomed out in dec 2025.
Disc: invested
Prolonged US/Israel-Iran war will squeeze this 50 crore. I personally believe the war will be short lived but one can never know for certain.
Domestic business is still solid.
Tried to do some modelling to find the Fair/Intrinsic value of SG Mart. Please let me know if you feel any assumptions need to be tweaked further.
SG Mart Model.xlsx (86.6 KB)
Disc: Invested
Big momentum in SG Mart for the past 1.5 months or so.. Even in such bearish market both SG Mart and SG Finserv are up by almost 5% each! Institutional buying or some Insider info, don’t know.
Its not just SG mart. APL Apollo group companies are rallying. Even I have some theory for sg mart but nothing concrete. Apollo pipes has seen >50% stock price appreciation since Jan 2026.
SG mart continues to give me great comfort in these shaky times with fresh 52W high at 500. If you look at the business, many worst case scenarios have happened in past two years They have successfully (sort of) dealt with huge and sudden steel price drawdowns, introduced new products and geography. Business is tested and ready to roll now. And this is a simple business to understand with growing volume. Management was over excited in the beginning but humble enough to admit miscalculations. This is what made me stick with the stock even in low phase. I am surprised at the rally recently but who are we to argue with Mr market.
Disc: invested and my biggest holding (25% allocation)
Noticing both SG Mart Limited and SG Finserve moving up together.
Could be some linkage with the buzz around Infra.Market planning a ~₹5,000 Cr IPO. The market seems to be re-rating players in the building materials ecosystem.
Also, Infra.Market started focusing on financing / integrated model kind of highlights the importance of credit in this space. Maybe that’s why SG Finserve is also seeing interest, as it could support SG Mart’s ecosystem.
Not sure how much is actually fundamental vs just sentiment-driven, but the correlation is interesting.
Good result - excellent growth QoQ and good growth on YoY basis.
Excellent cash generation. Net WC days only 20 !
Q4FY26 results declared. Much to unpack here along with the concall notes:
Q4 ebitda is 56 cr including 6cr inventory gains. This means they have missed their own target (60 cr) AGAIN! I simply cannot believe these people continue to miss own projections. Better to be more conservative going forward.
March was particularly challenging and their Dubai SC is doing very low business as expected. Expect 2 more months of pain. ebitda fy26 stands at 137 cr which is >30% growth. Below is the volume breakdown for the full year:
WC cycle of 20 is impressive. They have healthy cash flows and in particular cash from operations despite having razor thin margins:
Cash in the books stands at 750 cr. Going forward their plan is to do aggressive expansion of new service centers. Hence, I do not expect this cash to increase but they will not need any long term debt. Total capex done in FY26 was 525 cr. Expected capex for FY27 is 600 at least (roughly half will go for land acquisition). Please note they did no trade payables as acceptance meaning all payables are ordinary supplier dues, not bank-financed acceptance liabilities.
Whatever promises they made in FY24 were based on B2B metal trading. Management has realized the volatility of that business segment and very smartly pivoted to renewable and steel profiling segments. I believe this is the main reason for re-rating done by the markets. We must commend the management here despite doing similar volumes as last year they have managed a higher ebitda. Steel prices were hammered in FY26 resulting in overall inventory losses which does not help. Due to west asia war, B2B metal trading segment is hit the hardest and saw de-growth of >30%. Interestingly, this is their worst performing business segment in terms of ebitda margins. If management did not pivot to new segments we would all have become bag holders by now. I am not discussing each segment and its ebitda as I already discussed in detail with previous concall notes. please refer the same.
Regarding future guidance, it looks like management has ‘hesitantly’ reiterated the FY27 guidance of 300-350 cr ebitda. They has also realized the vanity in giving quarterly guidance. However, I would like to give my own GG (gaurav guidance) of 250 cr for FY27. Below is the rationale:
Dubai SC is hit so we are taking 50 cr out of the 350 cr. I expect that SC to only breakeven the fixed costs at this moment. India business is solid but we take out another 50 cr which leaves us with 250 cr. Even with this figure, they will easily achieve 50% long term cagr guidance.
Currently, 7 service centers are operational with 8 more to come in next two years. I have high expectations from dubai SC but let us extrapolate a scenario of FY29 ebitda from all SC combined. Assuming each SC contributes 8000 tons per month:
15 x 8000 = 1,20,000 tons per month
120000 x 12 = 14,40,000 tons in one year (FY29)
14,40,000 x 2000 = 288 cr ebitda
FY26 total ebitda is 137 cr while projection from service centers alone in fy29 is 288 cr. Here, we are assuming 2000 rs ebitda per ton which can vary from 1700 to 2100. Above is a conservative scenario.
FY26 was a decisive year for SG Mart. They have proven the business models despite so many headwinds like steel price volatility, shortage and disruption due to war. They are able generate profit with good cashflow even in such dire times. I expect them to do much better going forward with macros aligning.
@Akshada_Deo, I would like to know your opinion as well. What is your position in SG mart and outlook?
Disc: invested
Have some thoughts on screener tools lately. Many investors bind themselves with unnecessary rules like OPM > 20%, low debt, positive cash flows, high promoter holding etc. They filter stocks on screener with above parameters and buy already discovered business which may or may not generate returns.
SG mart on the other hand has razor thin margins of ~2% to begin with. To a casual investor scrolling screener it will look like trading at the lower end of the spectrum. In fact, razor thin margins is probably their biggest moat. No small or medium player can disrupt their business for the foreseeable future. On screener the promoter holding shows 36% which has declined from 75%. Again this would look like owner jumping ship but nothing can be further from the truth. If one looks at FY25 cash flow statements they will see a distressed business unable to generate cash and eating up available reserves. Screeners can generate all sorts of bias to an investor whose primary goal should be making money. Steel as commodity is a complex business which I swore to never touch but interestingly organized steel trading done by sg mart is a simple and easy to understand business (maybe the management makes it look easy).
To conclude almost all major indicators would scream red flags at sg mart on screener and one would walk away from the get go. While in reality this business has the potential to go 10x. Screeners as a tool to filter stock cannot be relied upon always.
Margins are razor thin because they are so many players and customers are not that picky that you can provide it all under 1 roof. we go to amzn because it’s all under 1 mart and he’s got power and bargain down sellers to get good margins. what you are saying is, even with convenience of 1 mart for customers, no seller prepared to give better margins ?
