Surya Roshni hits new high on Q4 boost, has surged over 70% this year

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26 Aug, 2025 12:21

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Surya Roshni Ltd hit a new high of Rs 844.60 in the opening trade on May 4, the third straight session of gains following March quarter earnings and analysts’ expectations of robust orders.

The stock, which has gained more than 70 percent this year, has surged analysts’ projection of robust orders, which offer greater revenue predictability, alongside the company's efforts to be debt-free within two years.

The company has also outlined plans to expand its capacity and increase annual marketing and advertising expenditure in the lighting and consumer segments to capture a larger market share.

"There have been inconclusive talks of demerging the steel and lighting divisions. We believe, given the size of these businesses, a division is unlikely to unlock much value. Surya Roshni’s focus on improving return ratios, cash generation, and resumption in strategic capex makes it a strong re-rating candidate,” Systematix Institutional Equities said in a recent note.

The firm reported a 9 percent decline in its March quarter earnings, while net profit doubled to Rs 155.54 crore from Rs 82.48 crore a year ago.

EBITDA advanced 76 percent to Rs 212 crore. Order book in hand exceeds Rs 850 crore at the end of FY23.

The management has guided steel segment sales volume at 900kt/1mt for FY24/FY25. For FY23, the steel segment locked in an EBITDA/t of Rs 6,496, up 40 percent from the previous year.

FY25 guided volume of 1mt translates into Rs 10,000 EBITDA/t. EBITDA/MT for FY23, analysts said.

The intended expansion of its Hindupur facility in Andhra Pradesh, with a capacity of 72,000 tons per annum, aims to achieve backward integration, thereby enabling cost-effective in-house manufacturing of GP and CR coils/pipes, they said.

This move would result in higher production volumes across the company's ERW, black, galvanized, and pre-galvanized pipe portfolio, thereby catering to the increasing demand in South India.

Surya Roshni plans to double its annual marketing and advertising expenses to about Rs 40 crore in FY24. The company will focus on increasing visibility in tier 1 cities while expanding market share in semi-urban and rural areas.

Conventional lighting will remain a small part of the product portfolio but still important for brand recognition in rural markets.

Higher margins from institutional sales will offset degrowth in conventional lighting. The management aims for a 10 percent EBITDA margin in the segment in FY24.

Surya Roshni prioritised deleveraging and successfully reduced its debt from a peak of Rs 1,130 crore in FY19 to Rs 410 crore in FY23. This reduction in debt was primarily attributable to the consistent performance of its steel pipes division, analysts at Systematix Institutional Equities said.

"Steady cash generation helped SYR reduce its debt by >60% over FY19 to about Rs 4.1bn; management expects to turn debt free by mid-FY25. The company is setting up a large diameter (18”-24”) ERW pipe mill at its existing facilities with a capex outlay of Rs 750mn; it is looking to backward integrate to produce galvanized pipes and CR coils/pipes at its Hindupur, AP plant,” they said.

The brokerage revised FY24E/FY25E EBITDA up by 17 percent/7 percent as it raised steel business EBITDA/t by 18 percent/7 percent to Rs 6,500/6,200/t.

It values Surya Roshni at 8x FY25E EV/EBITDA and raised the target price to Rs 1,173 a share from Rs 917.

IDBI Capital has maintained its “buy” rating on the stock but raised the target price to Rs 937 from Rs 760.

Given the stronger-than-expected Q4FY23 steel pipes margins, the brokerage raises its FY24/FY25 EBITDA estimates by 18 percent/10 percent, factoring in improved product mix.

The company’s order book exceeds Rs 8,500 crore (mainly exports and API Pipes). The IDBI report said that the company is seeing consistent order flow in API Pipes and other value-added products due to strong demand from oil & gas, CGD and water transportation sectors.

At 12.34 pm, the stock was trading at Rs 835 on BSE, up 2.4 percent from its previous close.

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