SGMART Q2 FY26 earnings call.
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Revenue
₹1,700 Cr
verified against source
Revenue YoY
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reported change
EBITDA
Pending
latest reported figure
Source
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Actual signal trajectory
Where this quarter sits.
Quarter read
What the record says.
SG Mart reported a challenging Q2 FY26 with 1,700+ crore revenue (+50% QoQ from weak Q1), but 1.6% EBITDA margin fell short of the 2-2.5% normalized range due to three headwinds: steel price crash of ₹3,000/ton causing inventory losses exceeding 50-60bps, front-loading of branding expenses, and upfront costs for new profiling/renewable businesses. Management admitted the FY26 EBITDA guidance of ₹200 crore is difficult to achieve as H1 delivered only ₹64 crore. The bright spot is the service center business now contributing 50% of revenue with 35-50% volume growth YoY, while B2B metal trading (30% of revenue) is intentionally deprioritized due to thin 500-1,000/ton spreads. Management targets Q4 as the true run-rate quarter when service centers and renewable structures (₹2,000-3,000/ton spreads) scale. ROCE target of 20-25% remains intact. Key risk: repeated guidance misses erode investor credibility, and persistent steel price volatility in a demand-weak environment could further compress margins.
Colored figures show movement against the previous available record.
Guidance to track
- Management explicitly admitted the ₹200 crore EBITDA target set earlier is unlikely to be met due to Q2 underperformance and Q3 continuing to face headwinds from branding expense amortization and October steel price decline.
- Management stated Q4 FY26 will demonstrate the 'true colors' of the business model once branding expenses are fully expensed, profiling business scales to 2,000-3,000/ton EBITDA, and service centers reach full utilization.
- Jaipur center to start in Q4 FY26; 2 additional leased centers operational. Management aims to expand pan-India with geographic diversification to East and South India, targeting Rajasthan and other underserved markets.
- Despite near-term margin pressure, management reaffirms the ROCE target as higher-margin businesses (service centers, renewable structures) scale, though acknowledges they will require slightly higher working capital.
Risks flagged
- Analyst Garvit Goyel directly questioned why management continues to set aggressive targets and then miss them within the same quarter (branding expense pre-booking was unplanned). Management apologized but offered no concrete mechanism to improve forecast accuracy.
- Management revealed that steel prices continued declining in October 2025 beyond Q2, suggesting inventory losses could persist into Q3 results. Management expects price plateau by November, but this is an assumption rather than certainty.
- Analyst Akhil Kumar questioned whether B2B trading is a viable long-term model given demand weakness persisting despite improved steel supply. Management's thesis relies on market share capture from unorganized players, but this assumes continued demand recovery.
- Service center economics are highly dependent on volumes exceeding 10,000t/month per center. Management admitted existing centers are exceeding initial 5,000t targets, but any demand slowdown could compress margins significantly given the fixed cost base.
Key quotes
- We have not been able to walk the talk... please do trust us that we are working day and night to ensure that whatever we send, we don't miss on that in the long term. It's just that some short-term pain we thought better to take and focus on the businesses which will give us desired profitability.
- Definitely, it is now difficult to achieve 200 crore EBITDA for FY26 because Q2 was pretty much below expectations in terms of margin spreads... Q4 should be the exit run rate which will give the true color of what SG Mart can do.
- Give us just Q3, and from Q4 onward you will see the real performance, the real strength of our business model and the consistency of these profits quarter on quarter because the businesses which are being built like service center and open profile renewable structures are very stable business with less volatility.
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