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Usha Martin Ltd

| Q2 & H1 FY26 Earnings Conference Call Transcript

BULLISH SENTIMENT

Report Source

⬤10th Nov 25

Summary : Usha Martin delivered strong Q2 FY26 financial results with improved margins and a robust balance sheet, driven by strategic initiatives and product mix optimization, despite some volume challenges.

Management Perspective positive : We are pleased to share that Q2 FY '26 reflected steady financial progress and disciplined operational execution. We remain confident in our ability to deliver sustainable and profitable growth in the coming years ahead.

Concall Report Analysis & Insights

Business Overview

  1. Consolidated revenues for Q2 FY26 were INR 908 crore, showing steady financial progress.
  2. Wire Rope business grew 2.6% year-on-year, driven by elevator and crane rope segments.
  3. Wires segment saw a 14.2% year-on-year revenue increase due to sustained demand.
  4. Operating EBITDA reached INR 173 crore with a 19.1% margin, aided by favorable mix and cost efficiency.
  5. Net cash position was INR 111 crore with a healthy ROCE of 20.3%.

Future Growth Prospects

  1. New high-performance rope machines expected operational in Q3, optimizing product mix.
  2. Final stages of approval for value-added LRPC range, expanding market presence.
  3. Capacity expansion in rope making, especially for elevator and crane ropes.
  4. Plans to increase wire production to 100,000 tons over 2-3 years.
  5. Expanding international distribution and service business capacity.

Management Insights

  1. Q2 FY26 reflected steady financial progress and disciplined operational execution.
  2. One Usha Martin transformation journey shows early benefits in Q2, driving financial discipline.
  3. Focus on high-performance, value-added ropes yields stronger realizations and profitability.
  4. Strengthening financial position by repaying INR 157 crore debt through internal accruals.
  5. Confident in delivering sustainable and profitable growth in coming years.

Signs of Skepticism

  1. LRPC margins are quite muted and it is a very thin margin business.
  2. Plasticated LRPC volume growth has not been significant so far.
  3. Ropeway projects like Kedarnath are 7-9 years away from commissioning, with rope being a small part.
  4. Volume growth in Q2 was softer than expected due to short-term factors.

Risk Factors

  1. LRPC division reported a 26% year-on-year decline in Q2.
  2. Volume growth was below expectations in rope and LRPC segments.
  3. Slight delays in commissioning new high-performance rope machines impacted Q2 volumes.
  4. Domestic rope market subdued due to delayed monsoon and softer demand.
  5. Demand in Saudi Arabia improving slower than expected.

Good To Know

  1. International business contributes 58% of total topline, driven by Europe (28%) and Americas (9%).
  2. US tariffs on products have largely been passed through to customers, minimally impacting margins.
  3. Integration and model changes at Brunton Shaw (UK) improved competitiveness and lead times.
  4. Fixed expenses reduced by over 10% compared to FY25 due to One Usha Martin initiatives.
  5. Gross debt decreased from INR 338 crore to INR 181 crore as of September '25.

Key Drivers

  1. New high-performance rope machines online.
  2. Value-added LRPC range approvals.
  3. Increased wire production to 100,000 tons.
  4. Expanding international market presence.

Key Analyst Discussions

Competitive Environment

  1. Competition is healthy, driving product upgrades and improved offerings.
  2. Wire segment is 10-15x larger than rope, with many domestic and international players.
  3. Usha Martin focuses on niche, high-quality wire products with better realization.
  4. European market competition is intense with European and Korean players.
  5. Company aims to increase market share in Europe through quicker delivery schedules.

Market Trends & Consumer Behavior

  1. US market shows good traction despite tariffs, with a healthy order book for H2.
  2. European market demand is stable to slightly positive in certain sectors.
  3. Demand pick-up seen in industrial sectors, crane, and offshore segments.
  4. Domestic growth expected from elevator, ports, mining, construction, and cranes.
  5. Infrastructure activity slowed due to extended monsoon, impacting LRPC volumes.

Financial Highlights

  1. EBITDA per ton for wire segment is around INR 10,000, stable over time.
  2. Overall EBITDA per ton for ropes is upwards of INR 55,000.
  3. Sustainable EBITDA margin for core business is expected to improve in coming quarters.
  4. Working capital days increased due to higher base in September '24 average calculation.
  5. Wire Rope realization increased from Q1 in both domestic and international markets.

Product Composition

  1. Rope portfolio tilted towards high-performance, value-added ropes for better profitability.
  2. Plasticated LRPC approvals from key customers expected to drive significant growth from Q4 FY26.
  3. Galfan/GALSTAR line received good customer response, capacity ramping up from Q4.
  4. Synthetic sling business is new, profitable, and complementary to rope products.
  5. Constantly upgrading product portfolio and introducing new variants in mining, elevator, crane ropes.

Strategic Considerations

  1. Company aims for INR 300-350 crore annual capex for organic growth over 2-3 years.
  2. Exploring expansion into value-added wires, focusing on niche segments.
  3. No immediate acquisition opportunities on the table, but keen to expand internationally.
  4. Well-positioned for upcoming locked coil bridges, LRPC plasticated, and suspension bridges.
  5. Actively engaging with shipyards and ports for marine segment opportunities.