Sambhv Steel Tubes Ltd.: Pricing led weakness, structure holds - Company Update

We maintain BUY rating on Sambhv Steel Tubes and increase our target price to Rs 155 (Rs 150 earlier). Increase in target price is mainly due to upward revision to FY26e/FY27e estimates. Q3FY26 was a strong volume-led quarter, but profitability came in below expectations due to pricing corrections throughout the quarter and temporary shutdown in GP segment. While topline growth remained robust, margin compression reflected a timing mismatch between falling product prices and raw material costs. With price hikes taking effect only post December’25 and raw material softening expected to flow through from Q4FY26, we expect earnings normalization Q4 onwards. Long-term conviction remains intact, driven by GP scale-up, structural benefits from backward integration and large greenfield capex on new stainless-steel capacity. At CMP, Sambhv trades at 6.3x FY28 EV/EBITDA, materially discounting its strong earnings profile. Reiterate BUY.

Revenue driven by strong volume growth despite pricing drag:

Sambhv reported revenue of Rs5.89bn; +59.6% YoY and +1.5% QoQ, marginally below our estimate of Rs5.99bn. Volume growth was broad-based across ERW, GP and stainless steel despite temporary shutdowns in GP line (15days); however, realisation declined ~5% YoY and ~7% QoQ, as steel prices remained weak through most of the quarter. Price hikes were implemented only after December end.

Margin compression driven by timing mismatch:

Gross margin declined to 26.8% (-418bps yoy; 107bps QoQ), translating into EBITDA of Rs510mn (+34.4% YoY, -15.3% QoQ) and EBITDA margin of 8.7% (-162bps YoY). The loss in margins was mainly driven by i) MS product prices corrected for the quarter vs raw material costs correcting with a lag of 2months and ii) Pressure on SS prices due to increase in imports (exemption in BIS requirement). EBITDA/t came in at Rs5,235, flat YoY vs Rs 6,099 in Q2. Lower finance costs partially cushioned PAT, which stood at Rs244mn (+131% YoY).

Longterm conviction sustained despite near term volatility:

The Q3 margin weakness is pricing and timing-led, not structural. We believe the correction in RM cost at the end of Q3FY26, along with the recent price hikes should boost Q4 margins. Beyond near-term recovery, Sambhv’s conviction rests on: (i) rising contribution from GP and stainless products, (ii) structural advantages from backward integration cushioning downcycles, and (iii) visibility on stainless scale-up (Kesda Phase-1) that materially reshapes the earnings mix in FY28. We have revised our FY26/27 earnings upwards by 6/10% to account for the higher offtake and lower finance cost.

Valuations, view & risks:

We expect the company to deliver 50%/53%/69% Revenue/EBITDA/PAT CAGR between FY25-28E. We maintain a BUY rating valuing it on SOTP framework assigning 13x MS EBITDA, 7.5x SS EBITDA to arrive at a target price of Rs 155/sh (Rs 150 earlier). Key risks centre on Kesda execution and ramp-up, volatility in SS grade acceptance and spreads, and the risk that capex-driven leverage delays the ROE re-rating proof-point.

Company website: https://sambhv.com/

*CMP is as per report published date

Click to download the full Sambhv Steel Tubes Ltd Q3FY26 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 Sambhv Steel Tubes Ltd Q3FY26 Company Update

These FAQs summarize key insights from MNCL’s institutional research on Sambhv Steel Tubes, focusing on recent performance, margin outlook and long-term growth drivers.

1. What is MNCL’s rating and target price for Sambhv Steel Tubes?

MNCL maintains a BUY rating with a revised target price of ₹155, indicating strong upside potential from current levels.

2. Why were margins weak in Q3FY26?

Margins declined due to a timing mismatch between falling product prices and raw material costs, along with a temporary shutdown in the GP segment.

3. When is margin recovery expected?

With steel price hikes implemented after December and raw material costs softening, earnings and margins are expected to normalize from Q4FY26.

4. What are the key long-term growth drivers?

Growth will be driven by higher contribution from GP and stainless steel products, benefits of backward integration and capacity addition under the Kesda Phase-1 expansion.

5. What risks should investors monitor?

Execution and ramp-up of new capacity, volatility in stainless steel spreads and any delay in improving return ratios due to capex-related leverage remain key risks.

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