Kirloskar Ferrous: revenue up 17% YoY but margins compress as tube profit collapses 80%
PAT +10.16% YoY · revenue +16.6% · margins compressing
₹2,046.68 Cr
+16.6% YoY
₹97.54 Cr
+10.16% YoY
4.72%
-0.2pp YoY
₹5.91
Kirloskar Ferrous reported consolidated revenue of ₹2,046.68 Cr for Q2 FY27, up 16.6% YoY and 15.5% QoQ, with PAT of ₹97.54 Cr, up 10.2% YoY and 18.5% QoQ, and basic EPS of ₹5.91. There was no exceptional item this quarter (unlike Q1 FY27's ₹29.33 Cr NCLT/ISMT merger-related stamp duty charge), so this is a clean print against a clean year-ago base — and on that clean basis, profit growth trailed revenue growth, the signature of margin compression rather than a strong quarter.
Q2 FY-2027 vs prior quarters
Operating margin fell to 10.89% from 12.21% a year ago and 12.18% last quarter, well short of the ~15% OPM management had explicitly guided toward for Q2–Q3 FY27 once price hikes crystallized (per the August 2026 concall). The compression traces almost entirely to the Tube segment: segment profit fell to ₹13.83 Cr from ₹67.74 Cr YoY (-79.6%) and from ₹40.61 Cr QoQ (-65.9%), even as tube revenue was roughly flat (+1.2% YoY to ₹629.53 Cr) — a margin squeeze, not a volume problem. Castings partly offset this, with segment revenue up 22.5% YoY to ₹1,308.42 Cr and segment profit up 62.6% YoY to ₹124.28 Cr, running ahead of management's 17-20% FY27 castings growth guidance. Steel segment profit nearly quadrupled YoY (₹8.97 Cr to ₹30.48 Cr) but on revenue growth of just 4.0%, well behind the 20% target management had set.
The stock went into the print at ₹429.2, down 9.4% over the past month of trading.
For context: this is the second-highest quarterly PAT of the last 6 quarters; revenue is at a 6-quarter high.
What the summary numbers don't show
EPS (basic) ₹5.91 vs ₹4.99 in Q1 FY27 and ₹5.38 in Q2 FY26
FY27: castings 17–20% growth (162k→188k MT), steel 20% (84k→110k MT external), tubes 10% minimum; pig iron ~700k MT; overall 15%+ growth. EBITDA 12–13% Q1; targeting 15% once price hikes crystallize in Q2–Q3. Capex ₹600–700 Cr this year, ₹3,000–3,500 Cr over 4 years.
— This quarter: missed
Against FY27 guidance (15%+ overall revenue growth, castings 17-20%, steel 20%, tubes 10% minimum, OPM scaling to 15%), the company is tracking ahead on overall revenue and castings but well behind on steel and tube volumes, and missed the margin trajectory flagged for this quarter. We could not find a quarter-specific Street PAT estimate for KFIL — only a full-year FY27 consensus (~₹30.2 EPS, +34% YoY) too coarse to grade this print against — so vsStreet is marked unknown; no separate management press release for this quarter was available in our records. Operationally, the Hiriyur plant was suspended for maintenance from Oct 1 and resumed Oct 17, 2026 — after the quarter closed, so it had no bearing on these numbers but is a Q3 watch item. Two Joint MD/Deputy CFO-level appointments (including Ajay Patil, Sept 21) and an independent director retirement were also recorded this quarter, with no direct P&L impact.
W1
Tube segment margin recovery: profit was ₹13.83 Cr this quarter vs ₹67.74 Cr a year ago and ₹40.61 Cr last quarter — watch for stabilization in Q3 FY27
W2
OPM trajectory toward management's guided ~15% once price hikes crystallize in Q2-Q3 FY27 — actual this quarter was 10.89%
W3
Hiriyur plant, suspended Oct 1 and resumed Oct 17 2026 (post quarter-end) for maintenance — watch Q3 FY27 production/volume impact
16% growth masks tube margin pressure; capex at risk
The verdict, the claims that held up, the sharpest analyst exchanges, and the risks — the earnings call, decoded from the transcript.
Hold
confidence 6/10
Grade B
Met 15%+ growth target; castings beat (30% vs ~17% guided); tubes missed (–2% vs ≥10% guided). Capex guidance maintained but project delays evident.
Cautiously Optimistic
next 1–2 quarters
Optimistic
multi-year
Revenue beat 16.6% YoY growth with strong castings recovery (+30% value) and pig iron pricing (+12.4%), but tubes contracted 2% and margin pressure evident in EBITDA. Capex execution (₹600–700 Cr) faces phasing delays; large foundry target (15k MT) hinges on Solapur/Rajpura ramp. Near-term: tractor slowdown emerging, tube margin recovery uncertain. Long-term: casting diversification and capacity expansion credible, but execution risk material.
₹2057 Cr
Revenue · +16.6% YoY₹138 Cr
Reported PAT · +13.1% YoYCompressing
Margins · vs guidance: MixedDid the claims hold up?
Castings revenue grew 30% in Q2
METValue ₹487.8 Cr → ₹633 Cr (30.2%); volumes 39,980 → 47,888 MT net (19.8%)
Pig iron prices up 12.4% YoY
METEx-works realization ₹38,000 → ₹43,054 per MT (+12.4%)
Tubes recovery 0.5% growth Q1-Q2
MISSTubes down 7.5% in volume; Q2 sales 48,547 vs 49,588 MT (–2.1%)
Pig iron external sales up 3.5%
MET1,34,000 vs 1,28,000 MT (+4.7% not 3.5%)
Capex on track ₹600–700 Cr FY27
UnverifiedNo spend detail given; guidance maintained, phasing delays acknowledged (Koppal 20 months, Jejuri pending)
Earnings quality
What changed since the last call
Casting guidance maintained
Neutral15% volumetric growth YoY confirmed; this quarter showed strong 30% value growth (₹487.8 → ₹633 Cr) but margin recovery tied to customer pricing mechanics (Q2Q pass-through model)
Tube guidance implicitly downgraded
DowngradePrior guide: ≥10% minimum; delivered –2% YoY (48,547 vs 49,588 MT). MD acknowledged 'improvement in tube sales realization and margin is a requirement' — signals acceptance of miss, not recovery path clarity
Pig iron external sales upgraded slightly
Upgrade1,34,000 MT actual (Q2 annualized 5.36 MT) vs ~700k guided for full year; price realization +12.4% exceeded expectations given commodity dynamics
Capex phasing delayed
Neutral₹600–700 Cr FY27 maintained, but Koppal alloy plant now 20-month execution timeline (from prior 'commencing'); Jejuri steel delayed pending technology finalization
The Q&A
Analysts pressed hard on margins (Bharat Sheth, Dhruvedh Kanakia, Vedant Rane all questioned tube/casting margin trajectory). MD acknowledged customer rejection deductions, Q2Q pricing lags, but stood firm on 15% casting growth. On capex & project delays, MD was defensive ('declarations done, succession planned'); analysts read caution but did not get concrete timelines. Overall: moderate pressure, management partially held ground but conceded margin recovery is 'requirement' not assured.
Casting capex projects — Pratik Kothari, Unique PMS
AnsweredPhase 1 almost done. Phase 2: 4k MT/month capacity by Jan, 2-3 month commissioning, 20 months execution for Koppal alloy plant. Rajpura sold out by March 31; focus on domestic tractor, automotive, earthmoving. Phase 2 will expand north customer reach.
Casting margin outlook — Dhruvedh Kanakia, Antique Stock Broking
PartialCustomers have Q2Q mechanism. Price hikes being passed gradually. Some more work to be done. Capacity util and machining expansion (₹5 Cr→₹100 Cr within 1–2 yrs) will improve. Value-additions from new customer foundries also pending.
Tube market recovery — Vedant Rane, Unifi Capital
PartialBad Q1 (oil/gas delayed). Q2 recovery to 48k MT. Anti-dumping extended 5 yrs. War, exports to USA hampered. Looking for 100k MT run-rate by half-year. Margin recovery is requirement; will depend on order book pricing, not commodity pass-through.
Pig iron external sales strategy — Pranav Jain, Ageless Capital
AnsweredExport price realizations were higher; window was sweet-spot. Domestic pressure less headwind given export supply relief. Will continue domestic focus but watch export upside. Supply demand and pricing will determine, not company direction.
Machining capex ROI — Manish Goyal, Thingwise Wealth
AnsweredCapex higher than revenue growth intentionally; capex is for infra. Should see ₹90–100 Cr run-rate within 1–2 yrs. Challenges: model change investments by customers, need to ramp capacity use. Without major capex, can cross ₹100 Cr within 1–2 yrs.
Large foundry capacity ramp — Pranav Jain, Ageless Capital
Answered1,250 MT/month capacity (15k annum). Mold cost ₹25–30 per unit; prices ₹40–50 higher. Large castings double the margin vs small. Per-ton EBITDA 14–15k currently; large foundry double margin expected.
Casting demand & tractor slowness — Dhruvedh Kanakia, Antique Stock Broking
PartialDemand good in Q1, Q2. Some slowness chatter on tractor but foundries fully loaded Q2 & Oct. Small corrections possible from tractor but broad-based demand strong from auto, earthmoving. We'll watch but not expecting major downturn.
Capex guidance & execution risk — Manish Goyal, Thingwise Wealth
Dodged15k MT target is installed capacity, 1,250 MT/month. Will see volume in FY28 mainly because components in dev, others in orders. Meaningful volume FY28; point well taken.
Pig iron margin support — Vedant Rane, Unifi Capital
AnsweredCoking coal major cost driver. Market-supported currently; pig iron on spot. Price up/down, no tinker daily. Customers + market supported margin slightly; will try to mitigate via commodity hikes + pricing alignment. No insurance.
Solapur foundry product mix — Pratik Kothari, Unique PMS
AnsweredCylinder blocks, heads, S.G. iron up to 300 kg; non-auto, machine parts. Will manufacture large castings. Domestic focus. Beyond cylinder blocks; can do any casting. Tractor OEM visible.
Succession & management clarity — Pratik Kothari, Unique PMS
DodgedDeclarations done, age known. Succession in planning. Exact timelines not known to all, but organizational interest ahead. Will ensure smooth transition, smooth succession to next leadership. Journey 15% CAGR will continue.
Guidance
FY27 overall 15%+ growth maintained
MediumQ2 delivered 16.6% YoY; full-year tracking above prior 15% guide. Casting 15% volumetric growth affirmed. Capex ₹600–700 Cr on track for diversification but project delays noted.
EBITDA 12–13% Q1, targeting 15% Q2–Q3 (prior call)
LowQ2 delivered 10.9% OPM; margin compression in tubes and Q2Q pricing lag evident. MD said margin recovery is 'requirement' but no new target stated; implies prior 15% target withdrawn or deferred.
FY27: ₹600–700 Cr; 4-yr: ₹3,000–3,500 Cr
MediumMaintained but phasing pushed: Koppal 20-month execution, Jejuri on hold. Solapur phase 2 Jan 2027 on track. Rajpura phase 2 by March 2027. Machining ramp to ₹100 Cr within 1–2 yrs (no direct capex number given).
Risks the call surfaced
Tube demand softness
MediumTube volumes down 2% YoY despite Q2 recovery; oil/gas projects delayed, Chinese imports weighing on pricing. Anti-dumping only extends 5 yrs.
Tractor market slowdown
MediumCasting demand good in Q1–Q2 but MD acknowledged 'some talk on the slowness coming into the tractor.' Auto & earthmoving still strong but tractor is 40–50% of foundry base.
Capex execution & project delays
MediumKoppal alloy plant execution extended to 20 months, Jejuri steel project on hold pending technology finalization. Solapur/Rajpura phasing also slipped. Large foundry at risk if ramp slower than 15k MT/annum target.
Casting margin compression
MediumCasting gross sales strong but net sales reduced by customer rejections (3–4%). Q2Q pricing mechanism means price increases lag cost inflation. Margin recovery dependent on new customer orders at higher pricing.
Machining scaling risk
LowCapex ₹240+ Cr invested with run-rate only ₹5 Cr/month. Target ₹100 Cr within 1–2 yrs needs 2x customer adoption & infrastructure buildout. Model changes by OEMs could slow payback.
Management
Score 6/10. Detailed on operational metrics (volumes, prices, segment growth); transparent on capex projects and capacity roadmaps. But defensive on succession planning and hedging on margin recovery timelines; EBITDA target deferred without explicit new number. Met 15%+ revenue growth guidance (delivered 16.6% YoY). Casting beat expectations (+30% value). Tubes missed (–2% vs ≥10%). Project delays evident (Koppal 20 months, Jejuri pending). Capex ₹600–700 Cr maintained but phasing uncertain.
1 · Q3 FY27 (Oct–Dec 2026)
Solapur phase-2 foundry ramp; tube margin recovery from new order book; tractor demand reset
2 · Q4 FY27 (Jan–Mar 2027)
Rajpura full commissioning (4k MT/month); Koppal alloy steel plant 20-month execution start
3 · FY28
Large foundry (15k MT/annum) target; machining value scale to ₹100+ Cr
Long-term: casting diversification and capacity expansion credible, but execution risk material.