Recommendation from Metals & Mining Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon[EasyDNNnews:PaidContentStart]

Sambhv Steel Tubes : POWERING INDIA’S ROADS, RAILS AND BRIDGES

HERE IS WHY
✓  Capacity expansion execution
✓  Value-added product mix
✓  Backward integration efficiencies

I ndia’s steel demand is entering a stronger upcycle, supported by higher infrastructure spending, manufacturing growth and rising urbanisation. This creates opportunities not just for large incumbents, but also for newer, backward-integrated players that can scale volumes and improve product mix. Sambhv Steel Tubes (Sambhv) is one of such smaller, recently listed players. Incorporated in 2018 and started with sponge iron manufacturing, it has steadily moved towards value-added products such as ERW black pipes, HR coils and stainless steel.

The company is now pursuing a scaledriven growth strategy. It plans to expand its finished product capacity from 5,08,000 tonnes to 17,08,000 tonnes by adding 12,00,000 tonnes through a phased greenfield expansion over the next 4–5 years. If executed well, this expansion can position Sambhv to participate meaningfully in India’s rising steel consumption while improving its earnings profile ahead of wider market recognition.

Sambhv delivered a clear step-up in performance in Q2 FY26, signalling improving operating conditions versus the previous year same quarter. Revenue grew 86 per cent year-on-year, supported by higher volumes and a healthier pricing environment. Operating leverage was visible in profitability: EBITDA jumped 168 per cent year-on-year, and margins expanded from 7 per cent to 10 per cent. This improvement was driven by better operational efficiency and improved cost absorption at higher utilisation, with scale benefits flowing through to the bottom line. The quarter’s momentum was also backed by demand traction, with sales volumes rising 53 per cent year-on-year, showing that growth is coming through not just in value terms but also in physical throughput.

In the near term, expecting the company to grow volumes while the realisations and margin to be stable at current level. After a FY25 phase where HR coil imports compressed steel pipe realisations and limited margin upside, the early FY26 trend suggests realisations and operating metrics are stabilising. A supportive macro swing factor here is the Indian government’s three-year safeguard duty (phased ~12 per cent in year one, 11.5 per cent in year two and 11 per cent in year three) on select steel imports, aimed at curbing cheap inflows. This could reduce import-led price undercutting and help domestic realisations hold up better than in FY25.

The company’s growth triggers are largely execution-led. First, continued volume ramp-up, supported by expanding distribution, wider geographic reach and higher plant utilisation, can deepen operating leverage, especially if cost absorption remains favourable. Second, the gradual shift towards value-added categories such as stainless steel and coated products can support better pricing power and reduce dependence on commoditised pipe spreads. Third, geographic expansion beyond its existing strongholds can improve customer diversification, shorten delivery timelines and strengthen participation in project-led demand across newer states and industrial clusters.

Sambhv trades at approximately 30x P/E, below the industry average of approximately 36x, suggesting a broadly fair valuation relative to its earnings. Valuation metrics remain reasonable with EV/EBITDA of 13.2 and P/BV of 2.8, supported by ROE of 12.4 per cent and ROCE of 13.9 per cent, indicating a stable financial base. While the company does not yet enjoy the same brand strength as larger peers, its move into value-added products improves the growth runway and pricing potential. With sound governance and a clearly defined expansion roadmap, we maintain a BUY view on Sambhv Steel Tubes.

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