MAHSEAMLES - Maharashtra Seamless Ltd. Share Price

During the earnings conference call for Q1 FY26 held on July 31, 2025, management of Maharashtra Seamless Limited outlined the following key points regarding their outlook:

1. Order Book and Sales: The company dispatched approximately 1,03,000 tons of seamless pipes in Q1 FY26 but encountered a significant slowdown in order bookings, dropping the order book to Rs. 1,149 crores. This trend is influenced by intensified Chinese dumping and reduced spending in the oil and gas sector.

2. Financial Performance:

   • Revenue decreased by 11% from Q4 FY25 to Rs. 1,303 crores.
   • EBITDA plunged by 41% to Rs. 165 crores.
   • Profit After Tax (PAT) fell by 4% to Rs. 234 crores, resulting in an Earnings Per Share (EPS) of Rs. 17.

3. Outlook for Q2 FY26: Management indicated that the September quarter is expected to be muted in terms of margins, and they do not foresee a significant improvement in order bookings or EBITDA per ton due to ongoing conditions in the oil and gas sector.

4. Key Financial Metrics:

   • Treasury stands at Rs. 2,919 crores.
   • Capital expenditure plan includes projects worth Rs. 852 crores, with significant ongoing investments in Telangana and Maharashtra.
   • The credit rating was reiterated at AA+, marking the highest rating the company has received.

5. Market Conditions: Management anticipates that while there may be a resurgence in order booking, the market conditions, particularly concerning Chinese dumping and oil sector spending, are likely to constrain growth.

6. Future Capacity and Modernization: While there are plans for modernization, the timing of such investments depends on the completion of current projects and market conditions. The company aims to preserve cash for upcoming needs, ensuring technological competitiveness against potential obsolescence.

These points highlight a cautious but strategically grounded outlook amid challenging market dynamics.

Earnings Call Q&A Summary

Question 1: "There is a sudden drop in EBITDA, so we are not able to get good pricing from the market because orders are collected much ahead of execution. Why is there no action on modernization with Rs. 2,900 crores cash?"

Answer: The decline in margin is due to decreased realization from increased Chinese dumping and a slowdown in oil and gas sector expenditure. We are progressing with our Telangana finishing line and cold drawn pipes projects, having issued orders worth Rs. 80 crores. We anticipate project completion within budget.

Question 2: "What is the update on premium connections in R&D?"

Answer: The process is ongoing and slow, taking more than two years. It involves a foreign tie-up, which adds complexity. I cannot provide a definitive timeline, but we are fully engaged in the project.

Question 3: "Regarding other income contributing to PAT and cash management, why are dividends not being increased?"

Answer: We've quadrupled dividends since FY 2022. While maintaining dividend levels despite profit declines, we're cautious due to potential obsolescence of our equipment that may necessitate future capex. We're also looking for viable inorganic opportunities.

Question 4: "What should we pencil in for EBITDA per ton for the current year?"

Answer: While I cannot provide a specific guide, the order book does not look encouraging for the current year. I expect margins to remain similar to current levels in the upcoming September quarter.

Question 5: "What is your contingency plan given low order visibility?"

Answer: We can lower prices by Rs. 3,000-4,000 per ton to maintain operations at lower profitability. However, we want to prioritize maximizing profitability over covering fixed costs.

Question 6: "What is the progress with ONGC orders under their minimum order quantity?"

Answer: There has been a significant decline in order placement, down to 400 crores. New tenders are being issued slowly, with negotiations ongoing for some.

Question 7: "What is the impact of Melt & Pour on seamless and ERW segments in 1Q FY '26?"

Answer: There has been minimal impact. Overall, the decline in the order book resulted from broader industry slowdowns rather than competitive pressure.

Question 8: "What do you see as your long-term strategic vision and key challenges ahead?"

Answer: We aim to remain a market leader by preserving our financially strong position and gradually increase capacity as per our Rs. 852 crore capital expenditure plan. Key challenges include Chinese market dynamics and domestic expenditure reductions.

Question 9: "What is the expected commencement of production from the Telangana plant?"

Answer: We expect to begin production by January 2026, reaching operational capacity thereafter.

Question 10: "How are you managing your cash and mutual fund investments?"

Answer: As of June 30, our cash management includes Rs. 514 crores in bonds, Rs. 20 crores in corporate deposits, and Rs. 2,339 crores in mutual funds across various securities. We prioritize safety and returns within our treasury strategy.

This summary provides concise yet comprehensive responses from Kaushal Bengani during the Q&A session of the earnings call while retaining key financial details and forward-looking information.