Q3FY26 Metal Ancillaries Sector Report - Weak pricing; converter business preferred

With a strong steel production growth of 10% yoy in Dec’25 quarter, we expect a resilient quarter for our metal ancillary pack, supported by reasonable demand and steady spreads. We expect strong volume growth for several names in our coverage. However, adverse pricing (yoy basis) and meaningful shutdowns has led to adverse impact on revenue growth for players like Godawari Power & Ispat (GPIL) and Kirloskar Ferrous Industries (KFIL). Flat steel and its supply chain products have also witnessed price corrections. However, we expect benefits on gross margins for the steel pack due to a much steeper correction in iron ore and coal price. The refractory pack is expected to report resilient performance due to strong steel production growth, price hikes & RM cost reduction, partly offset by pressure of rupee depreciation. Pure play on stainless steel pipes like Venus & Scoda tubes are expected to report strong growth backed by tailwinds in demand. We prefer Vesuvius, Scoda and Venus in our coverage with a buy on dips for KFIL and GPIL.

RHI Magnesita India:

We have factored a 10% yoy growth in consol. revenues in-line with the crude steel production growth in India. We expect higher growth for the erstwhile RHI entities and Hi-tech while Dalmia OCL is expected to grow below the steel production growth. We also expect the impact of low absolute Alumina cost ($ terms) to be offset by adverse forex movement in this quarter leading us to consol. margins of 11.4%, -93bps yoy.

IFGL Refractories :

We have factored a 20% yoy growth in consol. revenues at Rs4.5bn, largely driven by a 10% growth in the standalone business and a very high growth in the overseas entities on a very low base. This is driven by increasing penetration in the domestic market and a yoy improving performance in overseas subsidiaries in Europe and America. Margins are expected to improve due to price hikes in the America business and European entities turning breakeven. Signs for improvement in performance of overseas subsidiaries will be a key monitorable.

Vesuvius India :

We expect 13% yoy growth in revenues mainly led by strong demand for flow control refractories, price hikes and ramp up of new capacities of Mould flux powder, Basic and Alumina monolithics. Margins are expected to largely remain stable at 17.1%.

Ratnamani Metals & Tubes:

We expect a 14.2% yoy decline in consol. revenues, driven by a slowdown in dispatches in pipes business. Ravi Technoforge and Finow Spoolings are expected to report strong growth, providing meaningful boost to the topline. Margins are expected to remain within the guided range. Order inflows in the CS pipe segment will be a key monitorable.

Venus Pipes & Tubes:

We expect ~27% yoy growth in revenues driven by strong order execution, and improving domestic demand from power, engineering and railways. Despite global headwinds, exports would continue to display resilience. Margins are expected to stay at the same levels of 16-17% due to high employee cost and other expenses.

Scoda Tubes:

We expect ~14% QoQ revenue growth, led by the initial ramp-up of the newly commissioned seamless capacity, which began commercial production in November while the existing seamless business remains stable, supported by export orders and power-sector demand. EBITDA margin is expected to remain within the guided 15-16% band, as operating leverage from incremental volumes is offset by ramp-up costs.

Kirloskar Ferrous Industries Ltd.:

We expect substantial improvement in casting sales volumes (led by improved demand from tractor and start of volumes at Oliver engg. and Solapur phase 2 foundry) and seamless tubes to drive the revenue in 3QFY26, more than offset by decline in realisations and a loss in production of pig iron & tubes due to shutdown of the Hiriyur blast furnace and the Baramati plant. This has resulted into a 6% yoy decline in consol. revenues. Benefits of yoy drop in coking coal, iron ore and scrap cost along with savings from PCI and captive iron ore is expected to result in improved gross margins translating into EBITDA margins of 12.6%. The sustenance of tractor demand, order book for seamless tubes along with direction on pig iron spreads will be key monitorable in KFIL.

Godawari Power & Ispat:

We expect 11% yoy decline in consol. revenue, impacted by volume decline due to accident at the pellet plant and correction in long steel pricing. Correction in iron ore, thermal, and coking coal cost should help in maintaining the spreads, which along with higher proportion of pellet revenues should lead to resilient margins of 19.2%. Progress on EC for mining and other capex will be key monitorable.

Steelcast:

We expect a soft yoy revenue growth of 7% for Steelcast driven by tariff-led demand disruption in the US (~30% of sales) and moderation in customer offtake amid geopolitical uncertainty. Margins are expected to normalise in the sustainable 25-26% range, as Q2FY26 benefited from one-off input and forex gains.

Click to download the full Metal Ancillaries Sector Report 3QFY26 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Metal Ancillaries sector report 3QFY26

Why are refractory companies expected to perform better?

Strong steel output, price hikes, and falling raw material costs support volumes and margins, even after adjusting for currency headwinds.

Which sub-segments look strongest?

Refractories and stainless steel pipe manufacturers are better placed due to demand resilience, capacity additions, and export momentum.

Why are some steel-linked players seeing revenue pressure?

Steel price corrections, shutdowns, and plant disruptions have impacted topline growth, though margin recovery is underway due to lower input costs.

Which stocks are preferred in this cycle?

Vesuvius India, Scoda Tubes, and Venus Pipes remain preferred. KFIL and GPIL offer tactical buy-on-dips opportunities driven by margin recovery.

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