Kirl. Ferrous Q1 FY27 Earnings Call — Analysis (NSE: KIRLFER)
Pig iron prices bottom, casting volumes surge 18%, tube remains weak; management guides 15%+ overall volume growth and outlines ₹3,500 Cr capex path over 4 years.
Result quality: stable — Steady quarter. Management sentiment: optimistic.
The take
Q1FY27 Pig iron external sales 128,737 mt ( -3% YoY ) . New guidance — FY27 casting sales volume fy27 ~1,88,000 mt . New story: Strong casting demand and sold-out capacities .
Results
Pig iron production +5% YoY, casting production +19% YoY, tube production -8% YoY; EBITDA margin 12-13%; other expenses up ₹58 Cr on power & fuel cost increases.
Financial highlights
| Metric | Value | Change | Basis |
|---|---|---|---|
| Pig iron production | 165,120 mt | +5% | yoy · Q1FY27 |
| Casting production | 43,800 mt | +19% | yoy · Q1FY27 |
| Tube production | 51,968 mt | -8% | yoy · Q1FY27 |
| Pig iron external sales | 128,737 mt | -3% | yoy · Q1FY27 |
| Casting sales | 41,345 mt | +18% | yoy · Q1FY27 |
| Tube sales | 41,512 mt | -14% | yoy · Q1FY27 |
| EBITDA margin | 12-13% | point_in_time · Q1FY27 |
Guidance
Overall volume growth of at least 15% in FY27; casting sales expected to grow ~17-20% to ~1,88,000 mt, steel external sales >20% to 1-1.1 lakh mt, tubes ~10% volume growth.
What management committed to
- We will commission the 35 MW solar plant and 12 windmills (2.1 MW each) during the quarters June to September [2026]. — Q2FY27
- We will complete the 2-part foundry in Solapur (no-bake, 15,000 mtpa capacity for large castings) by October [2026]. — Q3FY27
- Rajpura foundry capacity will be expanded from ~25,000 mtpa to 40,000-45,000 mtpa in the next 8 months [by ~Apr 2027]. — 40,000-45,000 mtpa, Q1FY28
- Rajpura foundry will be further expanded in Phase 2 to 70,000 mtpa (6,000 tons per month). — 70,000 mtpa
- We will complete oxygen plant and enhanced pulverized coal injection at [Koppal] blast furnaces 1 and 2 by February, March [2027]. — Q4FY27
- We will expand Jejuri rolling mill capacity to 25,000 metric tons per month (3 lakh mtpa) and complete it within about 18 months [by ~Feb 2028]. — 25,000 mt/month (3 lakh mtpa), H2FY28
- The steel plant at Koppal will be commissioned within 2 years [by mid-2028] and will enable external alloy steel sales of 240,000 metric tons. — 240,000 mt external sale, H1FY29
- The expander mill at Baramati will be built, taking seamless tube capacity to 350,000 mtpa, and will take 3-4 years [to complete, by FY30]. — 350,000 mtpa, FY30
- Total casting realizable capacity across all 6 foundries will reach 270,000 mtpa by FY29 (this financial year plus 2 more years). — 270,000 mtpa, FY29
- Overall company volume growth will be at least 15% in FY27. — at least 15%, FY27
- Casting sales volume will grow 17-20% in FY27 to approximately 1,88,000 metric tons. — ~1,88,000 mt, FY27
- Steel external sales will be at least 1 lakh to 1,10,000 metric tons in FY27, more than 20% growth. — 1-1.1 lakh mt, FY27
Key themes
Capex-led capacity doubling and margin recovery
How the narrative shifted
- Pig iron price bottoming and recovery: Management highlights that falling commodity prices have reversed, pig iron prices are improving, international prices support domestic realizations, and the worst of the margin drag from pig iron is behind.
- Strong casting demand and sold-out capacities: Casting demand is robust across tractors, autos, earthmoving, and stationary engines. Rajpura is fully sold out; new foundry capacity is being built to capture growth, with customer commitments for large castings.
- Tube market subdued with oil & gas recovery awaited: Tube volumes and mix are under pressure due to low oil & gas activity and dumping from China; line pipes are filling capacity. Recovery hinges on geopolitical normalization and tender execution.
- Regulatory headwinds on green power benefits: Power trading window closure and reduction in green power usage hours from 17 to 8 have eroded expected savings; battery storage is being explored but is not yet scalable, putting near-term efficiency gains at risk.
- Massive capex cycle to double capacity: Management outlines a detailed, multi-year ₹3,000-3,500 Cr capex plan spanning foundries, pig iron upgradation, steel plant, expander mill, and rolling capacity to double castings and tube sales and add steel.
- Product mix shift towards machined castings and premium couplings: Increasing share of fully machined castings with child parts, large castings, and premium couplings is expected to lift realizations and move the company up the value chain, insulating margins from commodity volatility.
Operational commentary
- 2-part no-bake foundry in Solapur (15,000 mtpa for large castings up to 3 tons) to commission by October 2026; one customer wants full capacity.
- Rajpura foundry running at full capacity of ~2,200 mt/month; Phase 1 expansion to 40,000-50,000 mtpa underway in next 8 months, Phase 2 to 70,000 mtpa later.
- Hiriyur pig iron plant upgradation to 360,000 mt capacity with PCI, bell-less top; oxygen plant and enhanced PCI at Koppal BF 1&2 expected by Feb-Mar 2027.
- Jejuri rolling capacity being enhanced from 15,000 mt to 25,000 mt per month (3 lakh mtpa external alloy steel sales) over ~18 months.
- Steel plant at Koppal, expander mill at Baramati (seamless tubes up to 18 inches), and beneficiation/pellet plant with iron ore mines are in early execution stages.
- 35 MW solar plant and 12 windmills (2.1 MW each) in commissioning, expected operational during Jul-Sep 2026; green power trading window closed, only 8-hour usage allowed, battery storage being explored.
- Machining capacity being expanded across Koppal, Solapur, Rajpura; already supplying fully machined components with child parts (e.g., 6-cylinder head).
- Pig iron exports of 30,000 mt are happening at slightly better than domestic realizations; international pig iron prices have picked up, supporting domestic prices.
- Coking coal costs elevated; June-August coal cost higher than Apr-Jun; coal prices have recently eased slightly, blending opportunities being explored.
- Premium couplings project at Baramati to be ordered in a few weeks; oil & gas processing capacity and product range being expanded internally.
Analyst Q&A
Q. How should EBITDA margin shape up for the rest of FY27, and how will machining ramp-up improve EBITDA per kg?
Pig iron prices have improved and input cost pressures exist; casting demand strong, price corrections in progress; Q1 was the bottom of commodity downturn; benefits of cost pass-through to come in Q2-Q3; optimistic for improved performance; casting EBITDA can sustain 15% +/-1%.
Q. What will be the EBITDA impact of tube realizations and the trajectory for tube volumes for the year?
We are looking forward to recovery of volumes and margins in the remaining 3 quarters; I'm not prepared to say how much it will impact EBITDA.
Q. What are the timelines for reaching the ₹14,000 Cr revenue aspiration with 3 lakh tons castings and 4 lakh tons tubes?
Casting 3 lakh mt in 3-4 years; tube 350,000 mt in 3-4 years on completion of expander mill; steel 240,000 mt external sales in 2 years after Koppal steel commissioning; overall 3-4 years to achieve the aspiration.
Q. Has the decision been taken to start the Koppal steel project, and what about Jejuri profitability?
Decision taken to go ahead; project will take 2 years to implement; Jejuri focusing on 35 MW solar and windmills to reduce power/fuel cost, yield improvements done; rolling capacity expansion to 3 lakh mtpa in 18 months.
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