VSSL - Vardhman Special Steels Ltd Share Price

Vardhman Special Steels Limited provided a positive outlook during their Q3 FY26 earnings call, with management confident about future growth prospects and ongoing projects. Key highlights from the management's statements include:

1. Raw Material Prices: There has been a recent increase in raw material prices, with management expecting some impact on product pricing moving into Q4 FY26.

2. New Projects: The company announced a forging project with an investment of INR 475 crores, expected to start production in July 2028, ahead of the new steel plant which is projected to be commissioned by July 2029 and will have a capacity of 500,000 tons.

3. Capacity Expansion: The current melting capacity will remain at 300,000 tons, with rolling mill capacity increasing to 270,000 tons with the commissioning of a new reheating furnace by March 2026.

4. Revenue Growth: Management expects to increase production to approximately 720,000 tons of finished steel post-expansion, growing from 225,000 tons in FY26.

5. Sustainable EBITDA Estimates: Management provided guidance of sustainable EBITDA per ton from INR 8,000 to INR 11,000, potentially reaching aspirational targets of INR 12,000 in the long term.

6. Solar Plant Initiative: The company is finalizing its solar power initiative, which is expected to reduce carbon footprint from 0.73 to 0.48 and lower power costs significantly.

7. Non-Automotive Steel Segment: Over the next decade, management aims to diversify into non-automotive steel, projecting that it could comprise 30% of Vardhman's portfolio, a significant shift from the current focus on automotive steel.

8. Partnerships and Shareholder Support: Aichi Steel has increased their stake to 24.9% and expressed willingness to invest further, showcasing strong shareholder support for future projects.

Overall, the management is optimistic about scaling operations, entering new markets, and capturing growth opportunities moving forward.

Here are the major questions from the Q&A section of Vardhman Special Steels Limited's earnings conference call, along with detailed answers provided in the first person:

1. Question: "Can you just explain the expected peak revenue potential, EBITDA margin and ROC from this INR475 crores forging and machining capex?" Answer: The details will emerge as we establish both lines. However, I can say that once operational, we anticipate a decent return on capital employed.

2. Question: "What will be the sustainable EBITDA per ton that investors should model, excluding non-operational income?" Answer: For this year, we target INR7,000 to INR10,000 per ton. Next year, we aim for INR8,000 to INR11,000 per ton.

3. Question: "How do we see our revenue growth in the next 3 to 4 years, and what EBITDA margins do we expect?" Answer: We expect sustainable margins at INR8,000 to INR11,000 per ton, with a target of 720,000 tons of finished steel. Over three years, we aim to triple current production levels.

4. Question: "Which export geographies are likely to contribute meaningfully?" Answer: Our main export market is Thailand, accounting for over 70% of our exports. Through customers, we have some indirect exports to the U.S. and Europe.

5. Question: "Is the reheating furnace project on track for Q4 FY '26 commissioning?" Answer: Yes, the project is on schedule. We expect commissioning by March, with full benefits from April onward. Yield improvements will come from larger billet sizes, reducing waste.

6. Question: "Can you give more details about the benefits seen from the Kocks Block operation?" Answer: We're witnessing significant benefits, including improved roundness for superior quality, exact diameters for better customer satisfaction, and reduced changeover time for increased flexibility.

7. Question: "How does the capacity of your existing melting shop compare with future plans?" Answer: The current melting capacity is 300,000 tons, but we are seeking government approval to increase this. The new plant will eventually add another 500,000 tons.

8. Question: "What vertical is expected to scale up the fastest over the next few years?" Answer: The forging business is expected to come on stream within the next two years. Other segments will be evaluated over the next year.

9. Question: "How has the tariff situation affected your customers?" Answer: There was an initial reduction in off-take, but our sales are on track with the budget, suggesting that we could sell even more if we had capacity.

10. Question: "What is the current status of the new melting shop facility and modernization projects?" Answer: Everything is on track according to our previously announced capex plan. The electric arc furnace is ready for production, and we expect further capacity enhancements by mid-2026 with testing capabilities.

These responses summarize key points while including necessary figures and forward guidance.