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Manaksia Coated Metals & Industries Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤11th May 26

Summary : Manaksia Coated Metals & Industries Limited achieved record FY26 results, driven by strategic capacity expansion, product premiumization, and strong export growth, despite global macro headwinds.

Management Perspective positive : FY '26 was our strongest year on record across virtually every financial and operating metric. We are successfully able to pass through the entire impact of the incremental costs to our customers. We are not just growing profitably, we are growing with financial discipline and balance sheet rigor. We remain committed to our stated strategy of premiumization, export growth, capacity expansion and balance sheet deleveraging.

Concall Report Analysis & Insights

Business Overview

  1. FY26 was the strongest year on record, with consolidated revenue growing 13.5% to INR896 crores.
  2. EBITDA increased 49.21% to INR92.21 crores, with margins expanding to 10.29% due to efficiency and premiumization.
  3. Profit after tax grew 164% year-on-year to INR40.69 crores, with EPS at INR4.32.
  4. Balance sheet strengthened with interest coverage at 2.85x, current ratio at 1.75x, and net debt-to-EBITDA at 1.01x.
  5. Alu-zinc coating technology upgrade commissioned, increasing capacity to 1,80,000 metric tons.

Future Growth Prospects

  1. Second color coating line to be commissioned by July '26, increasing color coating capacity by 174% to 2,36,000 tons.
  2. 7-megawatt captive solar power plant in Gujarat to be commissioned by July '26, offsetting 50-55% of grid power dependency.
  3. Implementation of Salesforce CRM for 360-degree customer visibility and improved demand forecasting.
  4. Long-term vision to achieve 3x revenue and profitability growth by FY29, targeting 0.36 million tons capacity.
  5. Backward integration into a cold rolling complex is planned within FY28 to reduce raw material dependency.

Management Insights

  1. FY26 was a year of remarkable strategic progress and financial strength despite unprecedented external disruptions.
  2. The company successfully navigated headwinds with discipline, agility, and a clear strategic focus.
  3. We were able to pass through 100% of incremental costs to customers, ensuring strong EBITDA visibility.
  4. The shift towards higher value-added products and better product mix improved price realization per ton.
  5. We are committed to premiumization, export growth, capacity expansion, and balance sheet deleveraging.

Signs of Skepticism

  1. Management claims Q4 cost escalations were a 'onetime shock' and not reflective of underlying earnings power.
  2. The 3x growth vision by FY29 is ambitious and depends on various external factors like government policies and GDP.
  3. ROCE projections for future projects are based on hypothetical assumptions and Excel sheet workings.
  4. The speed of passing on cost reductions if raw material prices fall is uncertain, potentially impacting margins.

Risk Factors

  1. Escalating Middle East conflict caused significant headwinds in global supply chains and commodity costs.
  2. Freight rates surged by nearly 100% quarter-on-quarter, and industrial fuel prices spiked by almost 200%.
  3. Key raw material costs (petrochemical byproducts) escalated 50-75%, and metal prices reached 5-year highs.
  4. Supply disruptions of critical inputs delayed high-value export orders.
  5. Geopolitical environment, government policies, and country GDP can impact growth and project success.

Good To Know

  1. The company's external credit rating was upgraded in FY '26 (long-term to A, short-term to A1).
  2. Pre-painted steel now constitutes 80% of total quantities sold, up from 74% in FY '25.
  3. Export tonnage reached an all-time high of 66,172 metric tons, growing 110% year-on-year.
  4. Share of exports as a percentage of total revenue grew to 68.21% in FY '26 from 39.21% in FY '25.
  5. The company's current order book is robust, ranging between INR350 crores to INR400 crores, largely from export customers.

Key Drivers

  1. New alu-zinc line boosts capacity.
  2. Second color coating line expands offerings.
  3. Solar power plant reduces energy costs.
  4. Strong export growth and market acceptance.

Key Analyst Discussions

Competitive Environment

  1. Confidence in export market growth is based on consistent order book increases and long-term OEM relationships.
  2. New alu-zinc product opens access to markets in the Americas (South, Central, Caribbean) with higher preference.
  3. The company is continuously adding new customers, with 70% of revenue from regular, long-term clients.
  4. Existing domestic and export customers smoothly transitioned to alu-zinc products.
  5. The company is not currently targeting the US market for exports due to past geopolitical uncertainties.

Market Trends & Consumer Behavior

  1. Elevated cost environment for raw materials is expected to persist into Q1 FY '27.
  2. The company has been able to pass through incremental costs to customers in new pricing contracts.
  3. Customer order pipeline remains robust despite global tensions, with long-term customers ordering more in advance.
  4. Demand environment is expected to remain robust, with margin recovery anticipated in H1 FY '27.
  5. The premium of alu-zinc over galvanized steel is INR3,000-INR5,000 per ton, depending on product specifications.

Financial Highlights

  1. Total capex planned till FY '28 for current projects is INR65 crores for color coating line and INR30 crores for solar plant, funded by debt and equity.
  2. Alu-zinc products are expected to contribute superior EBITDA margins compared to galvanized products.
  3. The company aims to maintain a debt-to-equity ratio between 1x to 1.5x, avoiding aggressive leverage.
  4. New capacities could generate INR2,500-INR2,700 crores in revenue at peak utilization by FY '28.
  5. Solar power plant is expected to generate INR7-INR7.5 crores in power cost savings per annum, starting Q2 FY '27.

Product Composition

  1. Deliberate shift towards higher value-added products like pre-painted steel and alu-zinc is a consistent strategy.
  2. Alu-zinc offers superior corrosion resistance, enhanced surface finish, and longer product life.
  3. The company is now one of few Indian producers with 100% alu-zinc coating capacity.
  4. Customer acceptance for new alu-zinc and pre-painted alu-zinc products has been very encouraging.
  5. The company's product mix strategy aims for premiumization and higher contribution margins.

Strategic Considerations

  1. The company plans to implement a CRM complex for 360-degree customer visibility and sales pipeline management.
  2. The long-term vision for 3x growth by FY29 is driven by capacity expansion and backward integration.
  3. Key challenges to achieving 3x growth include government policies, geopolitical conditions, and funding availability.
  4. Sustainable EBITDA margin for the medium term is projected to be between 10% and 12%.
  5. The company has no immediate plans for further fundraising for current projects.