Abha Power & Steel's molding automation aims to lift utilization from 20% to 90% by August
H2 revenue fell 25% on a 20% insert price crash, but management is betting on automated casting and long-term OEM contracts for a margin recovery to 15-20%.
What's new
- H2 FY26 revenue fell 25% sequentially to ₹27.65 cr as insert prices crashed 20%.
- Automated molding line and heat treatment furnace targeted for full commissioning by end-August 2026.
- Sand processing capacity is being expanded 35x from 1,000 kg/hr to 35,000 kg/hr.
- Railway OEM long-term orders are expected to contribute 10-12% of FY27 revenue.
Themes from the call
Cyclical Pressure
Insert prices, which account for 40-60% of turnover, fell 20% in H2 due to a government contract gap in railway sleeper manufacturing, pulling consolidated margins down to 8.6% for FY26.
Capacity Transformation
The company is betting on a new automated molding line to take foundry utilization from 20-30% to over 90%, with a 35x expansion in sand processing capacity.
New Revenue Streams
The company has secured long-term contracts for two railway coach components and entered the defense sector with prototype orders from a PSU.
Guidance watch
- FY27 revenue growth targeted at high double-digits with EBITDA margin recovery to 15-20%, up from 8.6% in FY26.
- Capacity utilization is expected to jump from current 20-30% to above 90% after the molding capex is completed.
- The company targets 50% of orders with price variation clauses within months to manage future raw material volatility.
Risk flags
- The entire margin recovery thesis rests on the timely commissioning of the automated molding line by August 2026.
- Insert pricing is cyclical and volatile, and its contribution to revenue remains 40-60% of the total.
- Defense sector revenue is expected to be a single-digit percentage contribution for the next 2-3 years.
Key quotes
-
"We have successfully developed two very critical coach components that have entered commercial production and secured long-term orders from a major OEM."
— Atish Agrawal -
"Sand processing capacity increasing 35x from 1,000 kg per hour baseline to 35,000 kg per hour post-upgrade."
— Abha Power & Steel management
The brief
Abha Power & Steel is navigating a classic steel-cycle trough. The company's H2 revenue dropped 25% sequentially to ₹27.65 cr as insert prices used in railway sleepers crashed 20% during a government contract gap. Full-year EBITDA margins were pinched to 8.6%. Management says the pricing cycle has bottomed, pointing to a two-month uptick as sleeper plants restart.
The bigger story is the bet on automation. The company is commissioning a new automated molding line and a 35x expansion in sand processing capacity by August. The goal is to take foundry utilization from a meager 20-30% to over 90%, a move that should drive both volume growth and fixed-cost deleveraging. This is what management believes will underpin a margin recovery to 15-20% in FY27.
Alongside the capex, Abha is trying to move away from volatile inserts. It has landed long-term supply contracts for two railway coach components, expected to contribute 10-12% of FY27 revenue, and has entered the defense sector with prototype orders from a PSU. The company is also pushing for price variation clauses in more orders to buffer against future raw material swings.
The transition is delicate. The new revenue streams are still small, and the margin recovery is pinned on a capex timeline that must be met. If the molding line is delayed or insert prices stay weak, the promised uplift from 90% utilization will not materialize. The market is being asked to fund the ramp.
Abha's cycle is bottoming, but its turnaround is a capex bet that has to hit its August deadline.