KIRLFER - Kirloskar Ferrous Industries Ltd. Share Price

Management's outlook indicates cautious optimism for Kirloskar Ferrous Industries Limited throughout FY '26, citing expected improvements in both production and sales. Key points shared include:

1. Production Capacity: The Koppal plant is now geared up to produce 46,000-47,000 tons per month, while the Hiriyur plant has a capacity of 14,000-15,000 tons per month. This positions the company for increased output in upcoming quarters.

2. Sales Forecast: For castings, management anticipates reaching about 50,000 tons per month within the next two years, with a 15% to 16% projected growth in the casting business, while the tube and steel segments also expect similar growth rates.

3. Market Conditions: Pig iron prices have stabilized, with noted increases of up to INR 4,000 per ton in northern India (approximately 10%), which should alleviate margin pressures experienced in recent quarters.

4. Production Growth: Current casting production is reported at 39,000 tons, marking a 10% increase from the previous figures. Sales of tubes rose by 17%, and steel sales have also increased by 16%, reflecting stronger demand across segments.

5. Green Initiatives: The company is advancing its commitment to green energy, with a 70 MW solar power plant and additional projects underway, which are expected to be commissioned by Q2 FY '27.

6. Future Expectations: Management projects Q4 FY '26 will show improvements in margins for both the pig iron and casting operations. The integration of the Punjab foundry is expected to contribute around 15,000 tons in output, further enhancing overall production capacity.

Overall, the strategic investments and operational enhancements hinted at a positive trajectory for the company in the near future.

Question: "Sir, two questions. One is, pig iron prices were very low and that led to lower margins that we understand. But shouldn't the casting division and the tube division at least get some benefit because we sell a lot of our pig iron to these two divisions also? So, any color you can give here on at what price do we sell it to them? And do they benefit when pig iron prices are low and now pig iron prices are up, so will they face some margin pressure, sir?"

Answer: Yes, most casting customers use a price variance mechanism. If commodity prices rise, casting prices increase. If prices drop, we pass on the benefit to customers. While pig iron and steel scrap prices fell, our casting prices remained stable due to our product mix, allowing us to maintain casting prices by focusing on higher-value critical castings.

Question: "Sir, and second question in on the castings division that we are seeing the strongest trends possible in tractors and CVs. So where do you expect -- like, can we reach 50,000 tons next quarter? Or is that number at least a year away?"

Answer: Company growth comes from productivity and existing foundries. Solapur could add around 400 tons monthly; it has capacity for more. We're targeting 50,000 tons over two years with potential increases to 70,000 tons. Merging Punjab foundry could add 15,000 tons. Growth is steady; while we expect 15% growth in casting, we're making progress toward our longer-term goals.

Question: "So, sir, my primary question is we have somehow not able to deliver on our volume guidance, especially in casting segments despite having additional expanded capacity, we are still stuck at 35,000 metric ton of quarterly run rate. What exactly is the bottleneck which we are facing instead of generalized reason?"

Answer: Utilization in Solapur is improving but remains below potential due to new product development and complex castings. We're ramping up production and improving capacity utilization, aiming for steady growth. We expect 4,200 tons this year from Solapur and are addressing challenges to achieve higher volumes in the future.

Question: "So when do you expect the benefit of realization to kick in to be reflected in the numbers?"

Answer: The improvement in pig iron prices will reflect in Q4. We operate mainly on a spot basis, and price increases usually show effects within two weeks. So, based on recent trends, quarter 3 might have been the bottom, and I'm hopeful we can sustain upward momentum from here.

Question: "Sir, pig iron plant shut down for like almost 40, 50 days. What were the reasons?"

Answer: The shutdown was due to necessary maintenance, which extended because of poor market conditions. Running the plant under those conditions doesn't make economic sense, but our operations resumed to match demand optimally.

Question: "Can you tell me about color on the utilizations you have done in this quarter?"

Answer: Utilization for pig iron is over 100%. Solapur's is at 68%, Koppal's at 93%, Ahmednagar at 69%, Baramati at 49%, and Jejuri at 68%. We have the potential to improve productivity across all plants.

If you have any further inquiries or need additional clarifications, feel free to ask!