Summary of earnings call for SG Mart Ltd published on 31 Jul, 2025

SG Mart Limited
Q1 FY26
Call date · July 28, 2025

1 · Management Commentary

Key Positives

• Service Center business contributed 50% to Q1 revenue and 60% to EBITDA; monthly run rate now 40,000 tons from 5 operational centers.
• Distribution business (non-TMT) revenue scaled up to Rs. 196 crores in Q1 vs. Rs. 125–130 crores in Q4.
• TMT business volumes increased to 39,000 tons in Q1 vs. 33,000 tons in Q4; 11 franchisee partners operational.
• Renewable business started strong with Rs. 285 crores order book; full-year revenue expected at Rs. 400–500 crores.
• EBITDA margin surpassed 3% in Q1 despite lower revenue.
• Working capital days reduced to 15; annualized ROCE at 21%, expected to exceed 25% for FY26.
• Cash balance of nearly Rs. 1,000 crores; annual capex planned at Rs. 150–200 crores.

Key Negatives

• Miss on B2B trading volume due to poor steel availability in India; Q1 volume for top 3 steel producers declined by 11% vs. Q4 FY25.
• B2B trading segment volumes degrew by 50% QoQ.
• Repeated misses on quarterly guidance; concerns raised on aggressive targets and promoter holding reduction.

Forward Guidance

• Capex: Rs. 150–200 crores for opening warehouses and service centers; focus on asset-light (leased) centers.
• New service centers: 2 under construction (Jaipur, Ahmedabad), 2 leased (Indore, Ahmedabad); scouting for 3 more locations.
• Renewable business: Rs. 400–500 crores revenue targeted for FY26; Rs. 285 crores order book executable in next 3 months.
• TMT: Plan to add 3–4 new franchisee partners in next 9 months.
• FY26 EBITDA guidance reaffirmed at Rs. 200 crores; no risk seen to this target.
• ROCE expected to exceed 25% for FY26.
• Long-term: Targeting Rs. 400 crores EBITDA in FY27; revenue guidance depends on steel prices (Rs. 16,000–20,000 crores possible).
• Focus on profitability, lean cost model, and expanding product lines for higher margins.

2 · Q&A Highlights

Q 1 (Composite): Why did Q1 volumes and profits miss guidance, and is the Rs. 200 crore EBITDA target for FY26 still achievable?
A (Management):
• Q1 miss due to industry-wide steel supply shortage; B2B trading most impacted.
• Confident of achieving Rs. 200 crore EBITDA for FY26 as supply improves and other verticals scale up.
• Aggressive targets reflect business model ambition; expect ramp-up from Q2 onward.

Q 2 (Composite): What is the reason for consistent reduction in promoter holding?
A (Management):
• Promoter holding currently at 51%; not expected to fall below this.
• Any discrepancies are due to SEBI classification and will be rectified.

Q 3 (Composite): How will service center expansion proceed, and what is the rationale for reducing the number of centers?
A (Management):
• Each service center now capable of 10,000–15,000 tons/month (vs. earlier 4,000–5,000), so fewer centers needed.
• Plan to add 5 owned and 2–4 leased centers annually; focus on higher utilization and asset-light growth.

Q 4 (Composite): What is the outlook for the renewable business and its contribution to revenue?
A (Management):
• Rs. 285 crores order book to be executed in next 3 months; similar orders expected soon.
• FY26 revenue from renewables targeted at Rs. 400–600 crores.

Q 5 (Composite): How is the company managing employee costs and headcount with business expansion?
A (Management):
• Q1 increase due to hiring for renewable and TMT businesses; ESOP expense also included.
• Employee cost growth aligned with business scalability over next 2–3 quarters.

Q 6 (Composite): What is the impact of safeguard duties, BIS norms, and steel imports on business?
A (Management):
• Short-term impact from safeguard duty and BIS norms; imports reduced to zero in Q1.
• Confident that new domestic steel capacity will offset import constraints.

Q 7 (Composite): Is there a threat from digital B2B startups and competition in steel trading?
A (Management):
• SG Mart’s integrated model (service centers, renewables, TMT, distribution) is unique; no direct comparable.
• Strong supplier relationships and group backing provide competitive edge.

Q 8 (Composite): Why is there a large gap between industry steel supply decline (11%) and SG Mart’s B2B volume decline (55%)?
A (Management):
• Prioritized value-added processing at service centers over pure trading to maximize profits during supply shortage.
• Expect B2B trading volumes to recover as steel supply normalizes.

3 · Other Key Numbers

• 2,312 customers and 246 suppliers onboarded as of Q1 FY26.
• Service Center business contributed 50% to Q1 revenue and 60% to EBITDA.
• Service centers: 5 operational (Ghaziabad, Raipur, Bangalore, Pune, Dubai); 2 under construction (Jaipur, Ahmedabad); 2 leased (Indore, Ahmedabad).
• TMT Q1 volume: 39,000 tons (vs. 33,000 tons in Q4); 11 franchisee partners operational.
• Renewable business Q1 order book: Rs. 285 crores; full-year revenue expected at Rs. 400–600 crores.
• Distribution business (non-TMT) Q1 revenue: Rs. 196 crores (vs. Rs. 125–130 crores in Q4).
• Working capital days: 15 (down from Q4, which was higher due to advance to suppliers).
• Annualized ROCE: 21%; full-year ROCE expected above 25%.
• Cash on balance sheet: ~Rs. 1,000 crores.
• Annual capex planned: Rs. 150–200 crores.
• EBITDA margin in Q1: above 3%.
• FY26 EBITDA guidance: Rs. 200 crores; FY27 target: Rs. 400 crores.
• No inventory gain or loss in Q1 EBITDA (Rs. 35 crores).
• Share of non-steel products in distribution: 10%; steel: 90%.
• Distribution business margins: 1–3% depending on product.
• No steel sold from imports in Q1 FY26.

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.