Manaksia Coated Metals & Industries Limited (MANAKCOAT.NS) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '26 Results Conference Call of Manaksia Coated Metals & Industries Limited, hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Samiksha from Kirin Advisors. Thank you, and over to you, ma'am.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Manaksia Coated Metals & Industries Limited. From management team, we have Mr. Karan Agrawal, Whole-time Director; Mr. Mahendra Bang, Chief Financial Officer; and Mr. Tushar Agrawal, Senior Vice President. Now I hand over the call to Mr. Karan Agrawal. Over to you, sir.

Good afternoon, ladies and gentlemen. It's a pleasure to connect with you and share the progress we've made at Manaksia Coated Metals & Industries Limited during the first half of fiscal '26. The period has been marked by strong momentum, disciplined execution and clear strategic focus. On behalf of the management, I extend a warm welcome to our Q2 FY '26 earnings conference call. I'm joined by Mr. Mahendra Bang, our CFO; and Mr. Tushar Agrawal, Senior Vice President. I sincerely appreciate your time, engagement and continued confidence in our journey of growth and value creation. The first half of FY '26 has been an encouraging phase for us at Manaksia Coated Metals & Industries as we continue to strengthen our presence in the value-added coated steel segment with consistent performance and expanding capabilities. Our portfolio spans a wide range of pre-painted and galvanized steel products designed to meet evolving market needs. Our advanced manufacturing facility in Kutch, Gujarat serves as a strategic hub, connecting us seamlessly to both domestic and international markets. With exports to over 40 countries and a growing diversified customer base, we are expanding our capacity and systems to better serve customers across 4 end-use sectors, guided by our focus on quality, innovation and operational excellence. Q2 of fiscal '26 was another strong quarter for us. Our consolidated total income grew by 27% year-on-year to INR 224 crores, driven by strong demand and improved realizations. EBITDA more than doubled to INR 29 crores, reflecting a 113% growth, while EBITDA margin expanded by 534 basis points to 13%, highlighting improved operational efficiency and product mix. Net profit surged by 491% to INR 14 crores, translating into a net margin of 6%, which is up by 490 basis points year-on-year. Earnings per share also increased significantly by 347% year-on-year to INR 1.43. For the H1 of fiscal '26, total income rose by 28% year-on-year to INR 478 crores, while EBITDA increased 103% to INR 58 crores with a margin expansion of 446 basis points to 12%. Net profit grew by 423% year-on-year to INR 28 crores, translating into a net margin of 6% and EPS stood at INR 2.81, which is up by 290% year-on-year. This underscores strong and broad-based financial performance across operations. In addition to strong financial performance, our balance sheet has further strengthened during the first half of financial year '26. The interest coverage ratio improved to 3.62 as compared to 1.89 as on 31 March 2025, reflecting higher profitability and lower finance costs. The current ratio increased to 1.67 from 1.35, supported by efficient working capital management. The debt-equity ratio improved to 1.19x, down from 1.81x at the end of FY '25, driven by repayment and strong cash generation. Total debt declined by 27% from INR 141.28 crores down to INR 103.22 crores as of 30 September '25. Operationally, second quarter of fiscal '26 turned out to be an exceptional quarter, driven by consistent execution, healthy demand and record contributions from exports. Galvanized steel production grew by 8% year-on-year to 26,572 metric tons, while pre-painted steel output increased by 18% to 21,653 metric tons, supported by efficient plant utilization. The share of value-added product, which is pre-painted steel touched 92% of total sales, reflecting our focus on high-margin and quality-driven segments. Exports remained a key growth driver, contributing 85% of total sales, with export revenue up by 151% year-on-year, and export tonnage at a record of 20,590 metric tons. This performance showcases our strong operational foundation, agile execution, and growing global acceptance of products made at Manaksia Coated Metals. On the capital front, the company raised a total of INR 174.87 crores through 2 preferential allotments. The first one of INR 40.32 crores at INR 18 per share and the second one of INR 134.55 crores at INR 65 per share. During first half of fiscal '26, we collected INR 80.36 crores, including INR 74.60 crores in Q1 and INR 5.76 crores in Q2 with a balance of INR 13.65 crores pending for conversion. This equity infusion has further strengthened our balance sheet, reduced debt and enhanced financial flexibility to support ongoing expansion of projects. The Indian steel industry is entering a high-growth phase, supported by government initiatives such as the National Steel Policy, PM GatiShakti and the National Manufacturing Mission aimed at boosting capacity, efficiency and competitiveness. India targets producing 300 million tons of steel by the year 2030 and 500 million tons by the year 2047, alongside higher exports and per capita consumption. The focus on value-added and green steel manufacturing under the PLI and Make in India schemes is driving investment and long-term demand. These developments create a strong tailwind for Manaksia Coated Metals, aligning perfectly with our expertise in value-added coated steel products and expanding export presence. Looking ahead, we are entering an exciting phase of growth with multiple strategic projects progressing as planned. The aluminum zinc coating line conversion scheduled for current fiscal '25, which we believe will enhance capacity by 36% up to 180,000 tons per annum and position us among the few players in India with 100% aluminum zinc capability. The second color coating line expected to commission by early financial year '27 will expand coating capacity by 174% to 236,000 tons per annum, strengthening our value-added portfolio and customer reach. The 7-megawatt peak captive solar power plant targeted for early FY '27 will offset 50% to 55% of grid power dependency and lead to significant energy cost savings while advancing our sustainability goals. In parallel, the implementation of an MIS -- MES system and CRM systems will drive digital transformation, enabling real-time production visibility, data-driven decisions and stronger customer engagement. Collectively, these initiatives will strengthen our scale, efficiency and customer-centric growth, positioning Manaksia Coated Metals & Industries for the next phase of sustainable value creation and growth. Before I conclude, I would like to take this opportunity to thank our employees, customers, investors, and partners for their continued trust and support. The first half of fiscal '26 has been a period of strong growth and meaningful progress for us, and we remain confident about sustaining this momentum through disciplined execution and strategic investments. Thank you once again for joining us today, and for your continued confidence in Manaksia Coated Metals & Industries Limited. We will now be happy to take your questions.

[Operator Instructions] The first question is from the line of Sucrit Patil from Eyesight Fintrade Private Limited.

My question is, as metal prices and demand cycles keep changing, what long-term strategy do you see? Sorry, coming back, as metal prices and demand cycles keep changing, what long-term strategy do you see helping Manaksia build a strong identity beyond just being part of the commodity cycle?

Okay. Thank you for your question. Is that all?

No, I have a follow-up question. But once this gets completed, I'll ask my second question.

Right. So I think it's a very valid question, Sucrit. We are a player in the steel industry, and we do have a direct correlation to metal prices and the volatility of the commodity. I would like to share that we are in potentially the highest value-added segment of flat steel products by having the ability to produce pre-painted steel, which is the highest value creation that you can do on flat carbon steel. And our business model is largely a back-to-back model where we are not having an exposure to the commodity price risk since more than 80% of our business is back-to-back. And the spot changes in the market of commodity does not impact our inventory or our business model. So our strong focus on exports and OEM business has led to this situation, and we would like to continue this focus and strategy to be a dominant player and a strong player in the OEM segment and the export segment, which really creates a strong identity and value for our company, for our product and for our customers.

Okay. My second question is, looking ahead, what internal steps or cost management plan do you think are most important to protect the margin, especially if input cost or demand patterns keeps on changing?

Well, see, we have our own cost structure, which we are trying to make it more and more efficient every quarter by enhancing our capacity utilization by improving focus of the company towards higher value-added products and improving the focus towards export. So naturally, with higher capacity utilization, the fixed cost per ton reduces, and our upcoming investments for the capacity efficient in the Alu-Zinc production and the second line painted line will also add…

Sorry to interrupt, sir, but there is some disturbance in your line.

I will just mute it.

Yes. As I was saying, the capacity additions that we are doing on the Alu-Zinc front as well as the second pre-painted line will also lead to further reduction in the fixed cost per ton, thereby ensuring that our EBITDA margins are protected and potentially enhanced. Moreover, I think as we are shifting from a product of galvanized steel towards a more value-added product of Alu-Zinc steel, the potential cost savings on raw material also come into play, which have the further potential to contribute towards cost efficiencies and enhancement in margins.

[Operator Instructions] The next question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

So I have only one question regarding your capacity utilization side. So you have mentioned in the quarter 1 call that CapEx of INR 150 crores is ongoing with INR 50 crores already incurred. So like I want to understand like can you share the time line for commissioning of the new expanded lines expected increase in tonnage and when we might see them contributing meaningfully to the volumes? And continuing to that question, my question is -- like second question is regarding the products side. So when product diversification, could you elaborate on any higher-margin value-added coated products you are targeting for instance, specialty coating or niche domestic segment? So this is my question. Could you just explain regarding this thing?

Thank you, Rehan. Your first question regarding our CapEx projects and the resultant revenue increases. Well, as I mentioned on my opening remarks, the 3 critical projects that we have embarked upon where the CapEx has been done is basically the first one is the Alu-Zinc project, which is scheduled to start revenue generation within the current fiscal of FY '26, followed by the other 2 projects, which are the second pre-painted line, the second color coating line, which is expected to start generating revenue in early fiscal '27. And the third is the captive solar power plant, which will start giving its output in terms of energy cost savings, which is also expected from early fiscal '27. So this time line is something that we had shared even previously, and I don't have any reasons to believe that there is any shift in such time lines. The second question pertaining to value-added products for different value-added end users and higher margins. I think this is exactly the direction that the company is thinking. And the transition from galvanized steel towards Alu-Zinc steel is exactly the step for us to move in that direction, where the coating of an alloy of 55% aluminum, 43.5% zinc and 1.5% silicon will replace the traditional galvanizing process and lead to a much higher value-added product catering to a niche and demanding customers who need a much higher performance, corrosion resistance from the product to meet their end users. This will also lead to potentially cost savings and better price realizations by the company, which should result in better performance and higher margins for the company going forward. This is the exact direction that we're thinking in. And I think the enhancement in margins also can be driven by our continued focus to cater to the export market, which we have been doing and the numbers that I shared with you on the export front is also visible in our presentation speaks for itself in terms of our higher performance in the export market.

The next question is from the line of Prateek Chaudhary from Saamarthya Capital.

Sir, am I audible?

Yes, please.

Yes. So I have a couple of questions. One is that, why have our galvanized steel coil sales been very low this quarter and even in the previous quarter?

Sure. Well, this is an intentional, let's say, end result because we are producing 2 finished products. One is a first stage product, which is galvanized steel and the other is a second stage of value addition with the final product being pre-painted steel. Naturally, the value addition of pre-painted steel is the higher category of value addition and which also contributes to a higher EBITDA margin contribution per ton. And hence, in fact, it's a statistic that we are quite proud of that we have been able to reduce the contribution of revenue via galvanized steel and enhance the contribution of revenue via the sale of a bigger volume of pre-painted steel, which talks about our ability to sell more and more value-added product and focus more on higher value-added product. So this is absolutely intentional.

Understood, sir. And earlier in your presentation, you have written that once we completely move to aluminum zinc coating, then we could -- for the same capacity, we could see EBITDA increasing by 40%. But this time around in the presentation, that number is not mentioned. So has there been any change on that number due to market conditions or any other reason?

One second. Firstly, the statistic given in the presentation of the higher EBITDA margins, that is something that we are basically demonstrating in the sense of a market potential of what an aluminum zinc coating can potentially do to company's product profile and margin profile. We don't see any reason for this to change. And the technical aspect of aluminum being cheaper than zinc still remains as it is, where aluminum as a metal has always been cheaper than zinc and continues to be so, which would definitely, technically and theoretically, result in a lower raw material cost as compared to a production cost of galvanized steel.

Okay. And sir, with regards to your fundraising plan, what would be roughly the quantum of fundraise and utilization of the same into different areas, if you can spell out the same because we -- I think we just -- in the first half itself, we have received the money for the warrants issued earlier. So in that respect, what is the quantum and what are the utilization areas we are spending on?

I think the most recent fundraise that was completed by the company was a total of INR 134.55 crores. It was a preferential allotment of warrants, out of which roughly INR 120 crores has been realized by the company. And the end users for this previous fundraise was basically on the aspects of debt reduction, higher working capital requirement and for CapEx projects of Alu-Zinc and the second color coating line. And this has been the deployment of these proceeds.

And for the upcoming fundraise?

See, the company is continuously evaluating ways and means of raising funds for the expansion plans. And it continues to keep a pulse of the capital markets and to evaluate the available options for future fundraises to meet its needs for growth ambitions.

So that has not been finalized, the quantum?

No, not yet.

And what probable area we could utilize this for whenever it happens, say, in the next few months?

So as per the company's growth blueprint that we have already shared in our presentation, we definitely wish to grow horizontally in terms of our capacity expansion in the Alu-Zinc coating capacity from 180,000 tons towards 360,000 tons. And also, we wish to work on backward integrating our business by setting up cold rolling complex to make it a more integrated value chain. And I think these will be the projects that the company would work towards and the fundraises would be -- the large end use of the fundraise would be directed towards.

Okay. And sir, final question on your major geographies for exports, which would be those?

I would like to say that -- see, we have a customer base spread across 43 countries, which are ranging from the European continent consisting of the Southern European belt like Portugal, Spain, Italy, Greece and the Eastern European belt consisting of Poland, Romania, Bulgaria, Czech Republic and the Central European belt consisting of Germany, Netherlands. Apart from this, we also have active customers in Latin America and the countries of Colombia, Ecuador, Brazil and some customers in the Middle East. Having said this, we do have a dominant share of export moving towards the European continent.

[Operator Instructions] The next question is from the line of [ Ankur ] from Bajaj Finance.

Sir, in the previous call, you had mentioned that by 2027, your total capacity expansion will be at a full pledge and the entire capacity utilization also will be done by that time. So what's the new plan again, to fundraise such a big way? And what are the blueprints? You mentioned earlier also, but there is -- we need some kind of in-depth understanding of that.

Well, Ankurji, thank you for your question. As far as the current plans of expansion are concerned, which are basically divided into 3 phases, Phase 1, 2 and 3, Phase 1 and 2, which consists of the Alu-Zinc line upgrade, the second pre-painted line and the solar -- captive solar power plant. These are -- all these projects are in line with our estimates of commissioning and the capacity ramp-up, where I just mentioned earlier that the Alu-Zinc project will be commissioned within the existing fiscal '26 and the second pre-painted steel line and the solar power plant will be commissioned in early fiscal '27. And we don't see any deviation in these time lines that we are stating. And we are also fairly confident that with the strong order books from the export market and the domestic market and the growing customer base that we have in the OEM segment, the capacity utilization also should be very healthy and should be ramped up fairly quickly. Beyond this, there is a Phase 3 expansion, which is in blueprint stage for further addition of a second Alu-Zinc line and a backward integration project of a cold rolling steel complex, which we foresee happening in FY '28, for which I do not have any firm time lines to share with you, but this is what we are working on currently.

Okay. So for 2028, you are right now planning to raise the funds. Is that right?

We are evaluating all possible opportunities.

The next question is from the line of Sunil Jain from Nirmal Bang Securities.

Sir, 2 questions are there. One on the capacity expansion, which you said there will be conversion of the existing capacity to Alu-Zinc. So -- and that will increase your capacity as well. So the whole capacity will get converted or part of the capacity will get converted? And in that case, whether the Alu-Zinc stand-alone will be sold in the market in meantime when the other capacity of coated comes. So how that will work? And how is the realization for Alu-Zinc as compared to the normal galvanized steel?

Yes. Thank you, Sunilji, for your question. And I think you've gone through our presentation quite well to be asking intricate questions, which I appreciate. So yes, you're right. The capacity expansion and the upgrade to Alu-Zinc is happening for the entire capacity. So 132,000 tons is being upgraded to 180,000 tons and the entire 180,000 tons will become Alu-Zinc. So basically, we will be shifting from galvanized steel maker to an Alu-Zinc steel maker. And your second question was, will we be selling stand-alone product of unpainted Alu-Zinc before our second pre-painted or color coating line starts? The answer is yes. We will be having a surplus Alu-Zinc capacity before our second color coating line starts, which would be for a period of potentially 4 to 6 months. And in this period, we will definitely be selling stand-alone Alu-Zinc product, for which, by the way, there is a very large market in the domestic and export ecosystem, where unpainted Alu-Zinc is sold to the infrastructure projects like factory buildings, sheds, warehouses, cold storages, airport buildings, hangars, railway stations, metro stations, et cetera. And it forms a large percentage of the roofing and cladding end users, which are done by projects. And we intend to tap this sector and sell in the market for similar kind of end users.

Is there any difference in the realization of galvanized and Alu-Zinc?

Yes, absolutely. Alu-Zinc sells at a premium to galvanized steel in the market. And the reasons are because it is a superior product in terms of corrosion resistance, performance in terms of life, as well as aesthetically, it's a superior product as compared to galvanized, and hence, it does sell at a premium.

And second question related to the performance -- financial performance. If I see your gross margin in the last 1 year has moved up by almost around 100 basis points -- sorry, from 20% to almost around 31%. Any specific reason we don't see any great change in the product mix. So what was the reason for this improvement in the margin?

Well, there are multiple reasons which have contributed to enhancement of our overall margins. I can name a few of them. One of them is, obviously, higher capacity utilization. We have been ramping up capacity utilization, which has led to a lower fixed cost per ton and a better ability to amortize all our costs over a larger tonnage, number one. Number two, we have gradually shifted our focus from more commoditized segment end users to more niche and customized end users and customer segments such as HVAC, refrigeration, home appliances, clean rooms, bus bodies, and so on and so forth, which are having a better realization in terms of price and better margin profile. Thirdly, our focus and growth in exports are also one of the key contributors to this margin growth. And if you go through our presentation, you'll realize that our percentage of exports has drastically gotten enhanced as compared to what we did in FY '24 and what we did in FY '25, which is also one of the key reasons for this growth.

And sir, last question about the export market. So how you sell, means you sell it through distributors or to the end consumer, how you sell in the export market?

We are largely selling our product to end users in the export markets who are OEMs. And the percentage of sales to traders or distributors is very, very negligible.

So in that case, the number of customers in the export market, if you can say how many customers are there? And what is the product sale each billing size? Like it's a large billing size to a few customers or there is a large distribution of the end customers?

We have a good fair bit of diversity in terms of our customer base spread across a number of customers and number of countries and number of regions. So to give you an indicative number, I can say that we would have roughly anywhere between 40 to 50 active export customers throughout the year to which we would have sold our entire export tonnage in the last fiscal and a similar picture would be also drawn for the current fiscal as well. And in terms of concentration, I don't think more than 10% of our export sales are to more than a single -- I mean, restricted to a single customer.

The next question is from the line of [ Dhaval Jain from Sequent Investments ].

Sir, I wanted to understand the blended realization for galvanized and pre-painted this year compared to what we had in FY '25. So can you just give some understanding on this?

The realization for our galvanized and the realization of pre-painted per ton, I think I would have this number handy. Give me a moment, please.

Yes.

Yes. The sale price realization for galvanized steel in the quarter 2, you're asking for the quarter or what is your question, please?

Yes. So you can give about the quarter as well and you can give about the H1, what it has been versus what it has been by '25?

So for the quarter -- second quarter, our sales price realization per ton for galvanized steel was INR 71,671 per ton. And the sales price realization per ton for pre-painted steel for Q2 was INR 89,495 per ton. And for H1, this number was INR 71,572 per ton for galvanized and INR 88,539 per ton for pre-painted steel. And this compared to H1 of last fiscal was considerably higher, where I think, let's say, on a percentage basis, this is higher by about 7% year-on-year. And for pre-painted steel, the -- on a percentage basis, it would be higher by about 12% year-on-year.

Okay, sir. And my another question is, this -- when we have our capacity increase of galvanized steel Alu-Zinc in from 130,000 to 180,000 and pre-painted when we have it next year from 86,000 to 236,000. So what is the potential maximum revenue possible from this entire capacity that we have considering our capacity utilization at 75% or 80%, if we are closer to that?

Well, I think the sales price realization numbers that you have with you, which has been shared with you can be considered as consistent sale price realization that we are achieving in the market. And if you were to extrapolate that with the capacity increase and the utilization levels, you will be easily be able to get the answer to your question.

Right. And do we see these realizations increasing going forward? Or is it going to be stable right now?

Let's say that the market for steel prices do keep moving. And I cannot predict whether it will move higher or lower. But I definitely feel that I don't foresee much of a sharp increase or decrease in the prices going forward. In my view, it could be consistent as what we have seen in Q2.

Right. And my last question is, sir, the exports that we have at 92% of sales, right -- 85% of sales right now. Is this the same thing that's going to be continued going forward?

The export revenue that we achieved in Q2 is definitely at an all-time high. However, if you see the graph of the export contribution to our total revenue over the years has been consistently increasing from levels of 25%, then 35%, then I think in Q1, it was 57% and Q2, it was 85%. So it's safe to assume that, yes, we will keep continuing to grow the overall export revenue percentage to the total revenue consistently. However, 85% is definitely something which is, let's say, a unique situation where we had a very, very strong export order book. It's safe to assume that exports would be definitely upwards of 50% for the current fiscal.

[Operator Instructions] The next question is from the line of [ Mayank Agarwal from Scientific Investing ].

Yes. So to my understanding, the percentage of like the galvanized steel, which is used internally is around 75% to 80% to make PPGI, correct?

It depends on what is the total production of galvanized steel and the order book that we have for the pre-painted steel. But to answer your question, in Q1 and Q2, roughly about anywhere between 80% to 90% in that range was used for making pre-painted steel.

Okay. So my second question is a follow-up question. So basically, in the galvanized steel, like we are expanding our capacity from 132,000 to 180,000. And in the pre-painted, we are increasing from 86,000 to 36,000 (sic) [ 236,000 ] and eventually to 360,000. So my question is like since the galvanized steel, like the future capacity we have capped is around 180,000. So like how will the gap between this and the pre-painted will be met?

So yes, there will come a time where we will have our Alu-Zinc capacity of 180,000 tons and pre-painted capacity of 236,000 tons. And there will be a gap of roughly, say, 50,000 tons approximate between the 2. But one has to assume that there would be a percentage of capacity utilization that we'll be running at for the pre-painted steel. And the surplus capacity that we have for color coating can be potentially utilized by buying galvanized substrate from the market and performing color coating to produce pre-painted steel. However, we would indulge in any such kind of utilization only if we find it profitable enough to maintain our EBITDA per ton numbers.

Okay. And my next question is on order book. So last quarter, the order book was INR 450 crores and which now stands around INR 600 crores now. So like how much did we execute this quarter? And how much was the new order addition in the Q2?

See, the execution of order book in the quarter is reflected by the revenue that we have generated, right? So, I mean, we generated INR 220 crores of revenue, which was against the order book in hand. So I think that answers your question on what is the percentage of order book execution. And the incremental order book that you're seeing is a result of the new export orders and the new MOUs that we have signed with customers overseas as well as new orders from domestic markets, which is now standing at roughly INR 600 crores.

Okay. And like what is the average expected time line to execute the order?

The existing order book currently is having a time line of 12 months for execution.

Okay. Great. And the last question is on my aluminum-linked raw material procurement. So basically, 70% is backed by their order and 30% is like on the basis of spot and like the fortnightly price revision. So how does the aluminum price movement translate into margin impact for us?

Well, the business model is back-to-back anywhere ranging from 75% to 80% of the total volumes that we produce. And the remaining 20%, 25% is definitely earmarked for the spot orders that we execute for the domestic customers. The changes in the price of raw material, including steel or zinc or aluminum would be reflected in the market almost immediately from, let's say, every 15 days, every fortnight, like you said. So we are able to either pass on the price increase or decrease to the customers for the spot market quantum that we are executing almost every 15 days. So that is the frequency that we are able to pass on.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Ms. Samiksha. Thank you for the closing comments.

Thank you, everyone, for joining the conference call of Manaksia Coated Metals & Industries Limited. If you have any queries, you can write to us at [email protected]. Once again, thank you for joining the conference call. Thank you, Karan, sir. Thank you, Tushar sir, and Mahendra sir. Thank you.

Thank you very much. Have a good day.

On behalf of Kirin Advisors Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.