Steelcast Q2 margin falls 387 basis points despite revenue rise

Steelcast Castechnik’s Q2FY27 revenue rose 29.4% year on year to Rs 138.0 crore, but EBITDA excluding other income margin fell 387 basis points to 24.5% as total raw material and value-add costs increased 41.6%, leaving profit after tax nearly unchanged at Rs 23.4 crore.

Why did Steelcast’s Q2FY27 EBITDA margin decline?

Steelcast’s Q2FY27 EBITDA margin declined because operating costs increased faster than revenue. Revenue from operations rose Rs 31.3 crore, from Rs 106.7 crore in Q2FY26 to Rs 138.0 crore in Q2FY27, while EBITDA excluding other income increased by Rs 3.6 crore, from Rs 30.2 crore to Rs 33.8 crore. That difference reduced EBITDA margin from 28.3% to 24.5%, a decline of 387 basis points, where 100 basis points equal one percentage point.

The gap also extended below operating profit. Profit before tax rose 3.1% to Rs 31.9 crore from Rs 30.9 crore a year earlier, while profit after tax increased only 0.6% to Rs 23.4 crore from Rs 23.2 crore. Other income fell 52.0% to Rs 1.9 crore from Rs 4.0 crore, and tax expense rose 10.8% to Rs 8.6 crore from Rs 7.7 crore.

Which costs rose faster than Steelcast’s Q2FY27 sales?

Steelcast’s materials, manufacturing, power and stores-and-spares costs all grew faster than its 29.4% Q2FY27 revenue increase. Cost of materials consumed rose 56.4% to Rs 29.5 crore, manufacturing expense increased 52.0% to Rs 18.0 crore, power, fuel and water charges rose 63.2% to Rs 17.2 crore, and consumption of stores and spares grew 41.8% to Rs 18.9 crore.

Steelcast reported total raw material and value-add costs of Rs 83.4 crore in Q2FY27, up Rs 24.5 crore from Rs 58.9 crore in Q2FY26. Changes in inventories of finished goods and work in progress, or WIP, were negative Rs 0.3 crore in Q2FY27, compared with positive Rs 4.3 crore in Q2FY26. Employee expense rose 18.0% to Rs 15.3 crore and other expenses increased 21.6% to Rs 5.5 crore, both slower than revenue but still part of the operating cost base.

How did Steelcast’s first-half profitability compare?

Steelcast’s H1FY27 profitability also lagged revenue growth, although the margin decline was smaller than in the quarter. H1FY27 revenue increased 23.2% to Rs 262.8 crore from Rs 213.3 crore in H1FY26, and EBITDA excluding other income grew 14.3% to Rs 65.8 crore from Rs 57.5 crore. EBITDA margin consequently fell 194 basis points to 25.0% from 27.0%.

The first-half profit after tax result grew faster than the quarterly comparison but still below sales. PAT increased 10.1% to Rs 47.4 crore from Rs 43.1 crore, while PAT margin declined 215 basis points to 18.05% from 20.20%. Profit before tax margin fell 277 basis points to 24.2%, and other income decreased 23.0% to Rs 5.1 crore from Rs 6.7 crore.

Steelcast’s H1FY27 cost pattern was again above the rate of sales growth in major production inputs. Materials consumed increased 50.8% to Rs 63.8 crore, power, fuel and water charges rose 58.0% to Rs 35.2 crore, and manufacturing expense grew 43.0% to Rs 34.5 crore. Total raw material and value-add costs rose 29.3% to Rs 156.4 crore, compared with the 23.2% gain in revenue.

What drove Steelcast’s Q2FY27 revenue increase?

Steelcast attributed its Q2FY27 revenue increase to healthy business volumes, higher dispatches and the liquidation of inventory built in Q1FY27. Quarterly sales volume rose 28.1% to 4,370 tonnes in Q2FY27 from 3,411 tonnes in Q2FY26. It was also 8.3% above the 4,036 tonnes reported in Q1FY27, supporting the company’s stated dispatch-led revenue increase.

Steelcast’s sales mix changed toward domestic revenue in the quarter. Exports represented 52% of Q2FY27 revenue, down from 64% in Q2FY26, while domestic revenue rose to 48% from 36%. In H1FY27, exports accounted for 57% of revenue versus 59% a year earlier, while domestic sales accounted for 43% versus 41%.

The H1FY27 end-market mix remained concentrated in three sectors. Earthmoving was the largest contributor at 51% of revenue, followed by mining at 21% and construction at 18%; together they represented 90%. Regionally, Asia accounted for 47% of H1FY27 sales, America 35% and Europe 18%, while Q2FY27 shares were 52%, 32% and 16%, respectively.

Conclusion

Steelcast delivered higher Q2FY27 dispatches, volumes and revenue, but operating earnings did not rise proportionately as materials, manufacturing, power and stores-and-spares costs increased faster than sales. Revenue grew 29.4% and EBITDA grew 11.8%, while PAT rose 0.6%; EBITDA margin was 24.5% and PAT margin was 16.9%, compared with 28.3% and 21.8% a year earlier.

The presentation does not disclose a forward revenue target, margin target or scheduled event. The next results should therefore be assessed against the disclosed Q2FY27 drivers: inventory liquidation after Q1FY27, sales volume of 4,370 tonnes, and production costs including Rs 17.2 crore of power, fuel and water charges. Steelcast has annual capacity of 29,000 tonnes and states that captive renewable plants supply 80% of its power consumption.