Sambhv Steel Tubes Ltd. - Recovery delivered, growth visibility strengthens - Company Update

Sambhv’s 4QFY26 performance was a beat to our earnings estimates driven by sharp expansion in spreads. Revenue growth in the quarter was both volume-led and price led as the company took advantage of its uninterrupted natural gas supply to push GP volumes, capturing market share of players hit by LPG shortage. Stainless steel CRC (SS) growth was mainly driven by the sharp drop in China’s exports following licensing norms effective Jan’26. Long-term conviction remains intact, driven by GP scale-up, structural benefits from backward integration, large greenfield capex on new stainless-steel capacity which will be backed by PLI incentives.  In addition, Board approved incremental brownfield capex comprising i) 150ktpa debottlenecking expansion at the Sarora integrated facility and ii) 30MW captive power addition at Unit-3, adding new growth vertical for the company. We have upward revised our FY27E/28E earnings by 23%/2% to account for the structurally higher pricing and spreads across MS and SS divisions, despite moderating our SS volume estimate. We maintain BUY rating on Sambhv, led by an upgrade in TP to Rs 172 (Rs 155 earlier).

Revenue driven by strong volume growth and pricing:

Sambhv reported revenue of Rs 6.9bn; +38.4% YoY and +16.3% QoQ, marginally below our estimate of Rs 7bn. Volume growth was led by Galvanized pipes (GP) and stainless steel despite LPG shortages as the company timely moved to natural gas, ensuring no operational disruptions; Realization improved sequentially with multiple price hikes across all products. For FY26, revenue grew by 60% to Rs 24.1bn.

Margin expansion driven by improved realizations as well as low RM cost:

Gross margin climbed to 29.9% (+211bps yoy; +305bps QoQ), translating into EBITDA of Rs 922mn (+91.7% YoY, +80.8% QoQ) and EBITDA margin of 13.5% (+375bps YoY). The expansion in margins was mainly driven by prices hikes taken in the quarter across MS pipe and SS, accompanied by low raw material cost (three months lag). EBITDA/t came in at Rs 8,558, vs Rs 5,251 YoY and Rs 5,235 QoQ (beat to MNCL estimates). For FY26, EBITDA grew 79% to Rs 2.8bn, resulting in 120bps jump in margins at 11.4%. Adj. PAT grew 148% to Rs 1.4bn.

Long-term conviction strengthened by price and expansion tailwinds:

4QFY26 marks the beginning of earnings normalization, with recovery in both MS and SS pricing has resulted in structurally lifting spreads. However, we believe that Q4FY26’s exceptional performance is not sustainable, and the margins could moderate sequentially. 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, (iii) visibility on stainless scale-up (Kesda Phase-1) that materially reshapes the earnings mix in FY28E (iv) incentives in PLI uplifting margins and (v) the recently approved brownfield capex of Rs 500mn on incremental 150ktpa MS pipes capacity in Sarora along with a Rs 1.5bn investment in additional 30MW captive power plant at the facility. We have upward revised our FY27/28E earnings by 23%/2% to account for the structurally higher pricing and spreads across MS and SS divisions despite moderating our SS volume estimate. Remain positive in the long-term evolution story of Sambhv.

Valuations, view & risks:

We expect Sambhv’s Revenue/EBITDA/PAT to grow at a CAGR of 47%/44%/41% over FY26-28E. We maintain BUY rating, valuing it on SOTP, (13x to MS FY28E EBITDA, 7.5x to SS FY28E EBITDA) leading to a TP of Rs 172/sh (Rs 155 earlier). The upgrade in TP is due to upward revision in earnings. Key risks centre on Kesda execution and ramp-up, volatility in SS grade spreads.

Company website: https://sambhv.com/

*CMP is as per report published date

Click to download the full Sambhv Steel Tubes Ltd Q4FY26 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 Q4FY26 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.

Why is Sambhv Steel Tubes considered a strong growth company?

The company benefits from strong demand in galvanized pipes, stainless steel expansion, backward integration advantages, and capacity additions supported by PLI incentives.

What drove Sambhv Steel Tubes' Q4FY26 performance?

Revenue growth was supported by higher sales volumes, improved realizations, uninterrupted natural gas supply, and stronger spreads across MS and stainless steel segments.

What is the target price for Sambhv Steel Tubes?

Analysts maintain a BUY rating on the stock with a target price of Rs 172, reflecting confidence in long-term growth visibility and margin expansion.

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