SG Mart Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Reported EBITDA masks real performance: A ~Rs. 20 Cr inventory loss from a sharp steel price correction pulled reported EBITDA down to Rs. 17 Cr, but underlying business EBITDA was Rs. 40 Cr, a level management says proves the model works.
• Q4 is the proof-of-concept quarter: Management guided to Rs. 60 Cr business EBITDA in Q4, a 50% sequential jump, driven by margin normalization in trading, a 30% volume increase in solar, and new product launches.
• FY27 ambition rests on capacity, not demand recovery: The Rs. 350 Cr EBITDA target is built on new service centres, new solar plants, and new products, with volume assumptions deliberately kept conservative to account for a demand slowdown.
• The renewables pivot is accelerating: Solar structures already have a Rs. 300 Cr+ order book, capacity is tripling, and management is targeting 20-25% market share as the number one capacity leader.
• What to watch next quarter: Whether Q4 delivers the promised Rs. 60 Cr, the pace of order booking as steel prices stabilize, and any land acquisition announcements for the 10 new service centre locations.

The Inventory Loss: A One-Time Mask

• What happened: Steel prices fell to near-six-year lows by end-December, triggering a sharp Rs. 2,500-3,000 per ton correction. SG Mart carries 20-25 days of inventory, so the price drop created a ~Rs. 20 Cr inventory loss that flowed through the P&L.
• Why it is not structural: Management keeps inventory deliberately low and runs a pass-through model where product prices are fully linked to steel prices. The loss was a timing mismatch, not a speculative position gone wrong.
• Why it should not repeat: Indian steel mills have already increased pricing from January onwards, and management is fairly confident prices will not go lower than December levels. If the upward trend holds, Q4 could see a reversal of some inventory losses.
• The drag shrinks with scale: At Rs. 350 Cr EBITDA in FY27, the impact of any future inventory swings becomes manageable; at Rs. 500 Cr plus, the pinch will be very small.

Anubhav Gupta: "We are not scared of Rs. 17 crores EBITDA which we reported for the 3rd Quarter because the actual business EBITDA was Rs. 40 crores for the 3rd Quarter."

Q4 Bridge: Rs. 40 Cr to Rs. 60 Cr

• B2B and Service Centre margin recovery: In Q3, weak demand forced discounting that compressed B2B spreads to Rs. 500-600/ton (vs Rs. 900-1,000 normal) and Service Centre EBITDA to Rs. 1,500/ton (vs Rs. 2,000 normal). Discounts have now been pulled off and desired margins are being achieved.
• Solar volume step-up: Q3 did 17,000 tons from only the Ghaziabad plant. Q4 projects 25,000 tons as Raipur has started and Pune begins in February, a 30% volume increase plus operating leverage benefits.
• New product launches contributing: Rooftop solar structures, cable trade, slotted angle, and Purlin structures are expected to add almost 10,000 tons of additional volume in Q4, all selling under the APL Apollo brand with high margins.
• Conservative assumptions: The Rs. 60 Cr target assumes flattish sequential sales volume in B2B and Service Centre, no steel price tailwinds, and no demand recovery. Internal targets are higher.

Anubhav Gupta: "Sir that is why with a lot of conservativeness, we are giving this number although our internal target is high, right. So, Rs. 60 crores is something which we shall achieve definitely."

FY27 Roadmap: Deconstructing Rs. 350 Cr EBITDA

• The quarterly cadence: Rs. 60 Cr in Q4 FY26, then Rs. 65, 70, 80, 90 Cr sequentially through FY27, a build that management says has little room for error.
• Volume blocks, conservatively set: Service Centres are factored at only 8,000 tons/month each (vs 8,000 peak capacity) to account for demand slowdown. B2B Metal Trading at 125,000 tons/quarter, Solar at 13,000-14,000 tons/month, Trade at 200,000 tons for the full year.
• Five new Service Centres coming online: Punjab, Jaipur, Kolkata, Indore, and Ahmedabad will become operational during FY27, with Jaipur first, then Punjab, Indore, Ahmedabad, and Calcutta by year-end.
• Solar capacity triples: With Ghaziabad, Raipur, and Pune all running, capacity will be three times Q3 levels, supporting the volume ramp toward 180,000 tons for FY27.
• The only identified risk: A 15-20% crash in steel prices could derail the plan; management sees no other credible threat to the Rs. 350 Cr target.
• PAT flow-through: Per an analyst's math, Rs. 350 Cr EBITDA translates to approximately Rs. 250 Cr PAT, with interest cost stable and a slightly lower tax rate due to Dubai contributions, though other income will decline as cash is deployed into CAPEX.

Renewables: The Structural Growth Engine

• Order book and pipeline: Rs. 300 Cr plus as of the call, enough for 25,000 tons in Q4, with potential to cross Rs. 400 Cr by early February given the pipeline. Order booking paused briefly in January as solar companies adjusted to higher steel prices, but management expects it to resume in February.
• Capacity leadership: SG Mart is already the number two player after supplying structures for 1.5 GW of solar installations since Q1. With three plants running, it targets 20-25% market share in a 50,000 tons/month market.
• Two distinct sales channels: OEM business serves India's IPPs and solar EPC players, where the right to win is bulk steel procurement from Tata/JSW giving a pricing edge. Trade business sells rooftop residential structures through APL Apollo's 800-dealer network, with one mill already full and three more coming.
• Margin profile: Blended NSR of Rs. 65,000/ton at ~7% margin yields Rs. 4,500-5,000/ton EBITDA. New products like rooftop structures carry lower NSR (zinc-only coating vs zinc-aluminum for utility-scale) but still contribute high margins under the APL Apollo brand.
• Empanelment momentum: Now empaneled with 20-25 large OEMs and IPPs, a process that has become very easy as market acceptance has grown. Top 10 IPPs have aggressive installation plans in their business plans.

Service Centre Rollout: The 20-Centre Bet

• The January 2026 decision: Management took a call to go all out and establish 20 plus one service centres as soon as possible, a deliberate acceleration of the expansion plan.
• 10 new locations identified: Land acquisition is activated for Chennai, Hyderabad, Coimbatore, Hubli, Kolhapur, Kanpur, Ranchi, Vizag, Patna, Siliguri, Guwahati, and Bhubaneswar, with updates on locked sites expected in one or two quarters.
• Timeline: Five centres operational in FY27, all 20 by end-FY28 or early FY29. Rented facilities currently doing 3,000-4,000 tons/month each will be replaced by owned centres, with volumes shifting plus an additional 5,000-6,000 tons of market capture.
• Volume and margin targets: Each Service Centre is targeted at 8,000 tons/month at Rs. 2,000/ton EBITDA in India, with the Dubai centre earning Rs. 5,000/ton plus. FY27 guidance conservatively factors only 8,000 tons/month from one centre.
• Funding the build-out: Cash has already moved from Rs. 1,100 Cr to Rs. 787-790 Cr as land is acquired and machinery advances are paid. Other income will keep declining as cash is consumed by CAPEX, a deliberate trade-off management accepts.

Anubhav Gupta: "January 2026 is that month where we have taken a call that now we will go all out and we want to establish these 20 plus one service centres as soon as possible."

Steel Price Philosophy & Risk Management

• No speculation, ever: Management is explicit that it does not and will not take bets on steel price movements. Products are fully linked to steel prices on a pass-through model, and inventory is kept at minimum levels of 20-25 days.
• The Q3 lesson: The sharp correction was unusual, taking prices to near-COVID lows, and the hit came from unavoidable working inventory, not from a speculative position. Management does not expect such corrections to repeat regularly.
• Anti-dumping tailwind: Steel imports into India will reduce significantly due to anti-dumping duties, which should support domestic pricing. Dubai operations continue to be all-import.
• Working capital management: Days rose slightly to 27 due to advance payments to steel suppliers ahead of the anti-dumping duty imposition for restocking, a tactical move expected to normalize by March.

Anubhav Gupta: "We don't want to speculate or take bets on steel price movements, because that is not part of our business plan, never was, never will be."

Guidance & Commitments

Key Metrics