Steelcast Ltd - leading steel castings

Steelcast has reported another excellent set of results. EBITDA margins have finally started benefitting from op leverage & now at 23.5%.Volume growth remains healthy.

Concall was held today,some highlights:

β†’ Continue to see good traction from end customers.No signs of slowdown at all.In fact,given poor environment in EU the governments maybe forced to revive the economy via capex.

β†’ Order book remains at 3-4 months.Mgt said they had wrongly mentioned 300 cr in the last call,they always have 3-4 month kind of order book & that continues.

β†’ WC will sustain at current levels.Expect to reach 57% capacity utilization in fy23,90%+ in Fy26.Expect to sell 21k MT in Fy24.

β†’ Will see some price deflation/correction owing to RM & currency movements from Oct. Net impact won’t be more than 1-2%.

β†’ Power saving plans remain on track.Should lead to 2% kind of margin improvement at current util but in case of higher utilization company will have to buy from external sources.

β†’ Have been able to enter Japanese market with all prototypes approved.No idea of market size & not targeting any market share but wish to supply high quality castings.Japan will be 10-15% of total exports.American railroad supplies also on track & will start from Q3.

β†’ Participating in DefExpo & expect to make similar margins on those products.India market in general also continues to be solid.

Management as usual was a bit conservative but continues to deliver very well.Company has also paid another interim dividend.Company should be able to end with ~70 cr kind of pat this fy.

Disc.: Invested.Views are biased.

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Steelcast reported another solid set of earnings yesterday.

Revenue up 50%,EBITDA up 80% & PAT up 140%. Margins are up big time vs. Q1 from 23 to 26% now. The concall just concluded some highlights:

β†’ Did ~4000 MT vols in Q3,will do similar in Q4 as well. For FY24 company has enough visibility to do a run rate 5000 MT,translating to 70% capacity util.

β†’ Seeing no slowdown in end user industries and at customer end.

β†’ Broad margin range of 22-25%,very happy to be in this band being a B2B business. However,no one-off in Q3 either. Had around 1 cr of Fx gain.

β†’ Railroad orders & power cost saving plans are on track.

β†’ Have purchase orders in hand of 125-30 cr,good for 3-4 months. Keep inventory of not more than 30-40 days.

β†’ Company is envisaging capex plans,will share final decision after Q1FY24. Capacity addition will be done in phases even if idea is to expand capacity by 50%.

Lot of questions were around slowdown & analyst community seems to be in disbelief on seeing no impact on revenue growth or guidance. Company continues to deliver well. Markets like analysts seem to be in disbelief with stock consolidating since 4-5 months. Thus,valuations are much cheaper now. Company should be able to do 90-100 cr kind of PAT next FY,looks great for a debt free company growing at good rates & prudent with capital.

Disc.: Invested. Views are biased.

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