Capex, cost cuts spark turnaround hopes for Kirloskar Ferrous
ADVERTISEMENT The company has sold nearly 600 tonnes of castings from its recently commissioned Oliver foundry in Punjab and expects to increase production to 1,500 tons per month in the coming months. Castings remain the company's dominant segment, contributing 43 percent to total revenue as of March 2025 followed by the tube business at 23 percent and steel products at 18 percent.
Management expects that enhancing backward integration, including ramping up captive iron‐ore mining, will further bolster margins and shield the company from raw‐material volatility.
The company was able to expand earnings from the pig‐iron segment despite a downturn in benchmark prices due to lower coking‐coal costs and in‐house iron‐ore supply from Kirloskar Bharat mines. 'We expect to increase our own iron ore consumption in this year and thereby get more benefits in terms of reduced iron ore cost,' said RV Gumaste, MD, Kirloskar Ferrous during the earnings call after declaring March quarter numbers on May 09. For FY26, the company expects to consume at least 250,000 tonnes of its own ore compared with 57,000 tonnes in the previous year, unlocking substantial savings on one of its biggest cost heads.In a bid to enhance green energy initiatives, it plans to double the solar power capacity to 55-60 megawatts (MW) in FY26. The company aims to add 12.6 MW of wind power and 35 MW of solar capacity in the current financial year, with another 50-60 MW of solar planned for the next financial year.Despite headwinds in raw‐steel and pig‐iron prices, the company is confident of sustaining 14-16 percent operating margin before depreciation and amortization (EBITDA margin) in both its casting and tube divisions. 'We continue to work on two fronts, cutting manufacturing costs and shifting mix toward higher‐value products,' Gumaste explained.
ADVERTISEMENT 'Kirloskar Ferrous continues to remain well paced on margin expansion path amidst new projects underway to reduce raw material cost, coupled with margin accretive product profile,' JM Financial Institutional Securities said in a report. The broking firm has maintained a 'Buy' call on the stock. However, it has reduced the price target by 17% to Rs 610 and lowered earnings forecast by 22% for FY26, citing lower volume growth. The stock was traded at Rs582 on Thursday on the BSE.
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