Scoda Tubes Ltd. - Poor performance; Chasing strong recovery - Company Update

Scoda’s 4QFY26 performance was a miss to our estimates due to higher than expected impact of temporary shutdown at the piercing plant (led by disruption in gas supply). This also led to high operating expenses which cascaded into miss on margins. However, normal operations resumed from April’26 and we expect margins to recover above 14% in Q1FY27E. Strong demand from the power sector and data centers, expanding global approvals, capacity expansions in welded pipe, low threat from new entrants and sustained supply tightness reinforce our conviction for re-rating. The phase 1 and phase 2 of new welded capacity is delayed, with commercial sales now expected to start from Q3FY27E. We have downward revised our earnings estimates by 9.6%/9.4% in FY27/FY28E respectively to account for this delay and weak realization. We have downward revised our TP to Rs 200 (previously Rs 250), mainly due to cut in earnings and valuation multiple, despite rollover. With the recent share price correction, Scoda is trading at very attractive valuation of 10.8x FY28E PE, leading to our BUY rating.

Weak quarter due to temporary shutdown in hot piercing operations:

Scoda reported revenues of Rs 1.2bn; flat yoy; -18.9% qoq; lower than our estimates of Rs 1.3bn. The weak performance was mainly due to shutdown of the piercing plant for nearly three weeks during the month of March, following gas supply disruptions. FY26 revenue grew by 7% yoy to Rs 5.2bn.

Elevated operational expenses affect margins:

Scoda reported EBITDA margins at 13.5%; -56bps yoy; -165bps qoq in Q4FY26, translating into EBITDA of Rs 167mn; -4% yoy; -29% qoq. Margins were impacted by elevated operating expenses due to curtailed operations. PAT stood at Rs 63mn; -7% yoy; -45% qoq. In FY26, EBITDA declined by 2.3% yoy at Rs 762mn, resulting in margin of 14.7%; -140bps yoy. Full year PAT came at Rs 388mn, +7.5% yoy, whereas EPS declined 9.7% (IPO in FY26) to Rs 6.5/sh.

What drives our conviction in the thesis?

The piercing plant has resumed operations from April and seamless utilization remains healthy. The fundamental conviction in Scoda is driven by strong underlying market demand and a deficit on supply. The Power sector is forecasted to be the primary demand driver for the three years, supported by major thermal power capacity additions announced by NTPC and Adani Power along with increasing opportunities in data centers for welded pipes. Scoda is well-positioned to scale up utilization from the newly secured approvals at entities like ADNOC, SABIC, Reliance and BARC. This will be further supported by large BHEL tenders (now includes hot pierced tubes in their manufacturing criteria) and increasing presence in the US and Europe. The welded pipe commercialization is now delayed by a quarter, and commercial sales are now expected from Q3FY27E. We have cut our earnings estimates by 9.6%/ 9.4% respectively in FY27E/ FY28E to account for this delay and lower realization. Remain positive.

Valuation & key risks:

Due to weak execution and delays in commissioning new capacities, we have reduced the valuation multiple. We now value Scoda tubes at a 17x FY28E PE (19x previously) to arrive at a TP of Rs 200/sh (previously Rs 250/sh).  The downward revision in TP is due to cut in earnings and valuation multiple, despite valuation rollover. We maintain BUY rating due to sharp correction in share price (rich valuation). Key Risks: Weakness in export demand, commodity price risk, delay in setting up of new welded plant.

Company website: https://www.scodatubes.com/

*CMP is as per report published date

Click to download the full Scoda 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 Scoda Tubes Ltd Q4FY26 Company Update

These FAQs highlight key takeaways from MNCL’s institutional equity research on Scoda Tubes, covering performance trends, growth drivers and risk factors relevant for long-term investors.

1. Why did Scoda Tubes report weak Q4FY26 results?

The company faced a temporary shutdown of its hot piercing plant due to gas supply disruptions, affecting production volumes, revenue growth and operating margins during the quarter.

2. Has plant operation resumed?

Yes. Management confirmed that normal operations resumed in April 2026, with expectations of margin recovery and improved utilization going forward.

3. What are the key growth drivers for Scoda Tubes?

Major growth drivers include rising demand from thermal power projects, data center infrastructure, export market expansion, new customer approvals and welded pipe capacity additions.

4. How important are customer approvals for future growth?

Approvals from organizations such as ADNOC, SABIC, Reliance and BARC can significantly enhance business opportunities and support higher capacity utilization.

5. What is the outlook for the welded pipe business?

Commercialization of the new welded pipe capacity is expected from Q3FY27. The project is anticipated to expand product offerings and contribute meaningfully to future revenue growth.

6. What are the key risks?

Key risks include weaker export demand, commodity price volatility, project execution delays and further postponement of new capacity commissioning.

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