Sarthak’s Q3 results reinforce immunity from steel cycles

Sarthak Metals once again declared a healthy EBITDA, both in absolute terms and margins, despit its consumers – the steel makers – still struggling for margins. This confirms what the management has been saying: that Sarthak’s business is not exposed to steel sector cyclicality.

Key Points from Q3 FY23 results:

  • EBITDA margin at 10.9% – up 70 bps on y-o-y basis
  • Revenue dropped 13% mainly due to lower price realizations amid a general fall in core wire product basket to the tune of 20%. Sequential volumes were up 9% for core wire in Q3
  • Management has been consciously protecting its margins by focusing on profitable orders.
  • The company completely paid off long-term debt, and also reduced short-term borrowings. Total debt was Rs 3.1 crore in Dec ’22 – down by 84% in the current financial year.
  • Net cash increased to Rs 20.8 crore in Dec‘22 as compared to Rs 18.2 crore in Sep’22

This is high-quality business, poised for continued strong growth. At ~ 5x EV/EBITDA on a TTM basis, we believe the business is highly undervalued.

We will be happy to address queries and arrange interaction with the Sarthak Metals management.

The detailed Q3 report is posted here.


About Sarthak Metals:

Sarthak Metals Limited, an ISO 9001-2015 certified company, is India’s leading manufacturer of metallurgical cored wires. It provides modern metallurgical solutions using wire injection technology to the Steel Manufacturing Industry. Sarthak covers a large client base across India, providing highest quality products to the top steel manufacturing companies in the country.

(Wisdomsmith assists Sarthak Metals on Investor Relations)

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