Why Did Nelcast Report Lower Q2 Profit and Margins Despite Stable Demand?
About the Company
Nelcast Limited is a leading manufacturer of ductile and grey iron castings catering to automotive, railways, and industrial sectors. With plants strategically located in Andhra Pradesh and Tamil Nadu, the company serves OEMs such as Ashok Leyland and Tata Motors. Despite a robust order book, the quarter reflected margin pressures due to rising input costs and slower demand recovery in the commercial vehicle segment.
Quarterly Performance Overview
Nelcast’s Q2 FY26 results indicated contraction in both top line and profitability. Revenue fell marginally on account of muted exports and a temporary slowdown in the domestic automotive segment. Higher energy and raw material costs weighed on EBITDA margins, though management remains confident of recovery in H2FY26 with improved utilization levels and cost optimization.
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Q2 FY26 Financial Snapshot
| Metric | Q2 FY26 | Q2 FY25 | YoY Change |
|---|---|---|---|
| Revenue | ₹2.99 Bn | ₹3.30 Bn | ▼ 9.4% |
| EBITDA | ₹171 Mn | ₹213.7 Mn | ▼ 20% |
| EBITDA Margin | 5.72% | 6.47% | ▼ 75 bps |
| Net Profit | ₹48 Mn | ₹98.2 Mn | ▼ 51% |
Peer Comparison and Valuation Metrics
| Company | P/E (x) | ROE (%) | Debt/Equity |
|---|---|---|---|
| Nelcast | 18.4 | 9.6 | 0.28 |
| Steel Strips Wheels | 20.5 | 10.4 | 0.36 |
| Wheels India | 16.8 | 8.2 | 0.41 |
SWOT Analysis
| Strengths | Weaknesses | Opportunities | Threats |
|---|---|---|---|
| Diversified client base and long-term OEM relationships. | Thin margins amid volatile raw material costs. | Growing demand for EV and rail components. | Energy price inflation and competitive pricing pressure. |
Investment View
Nelcast’s performance this quarter reflects temporary margin pressure rather than structural weakness. With gradual demand recovery expected from the automotive sector and stable order flows, the stock could offer value in the medium term. Investors may consider accumulation near lower levels with a one-year horizon as margin recovery is likely from FY27 onwards.
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Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Registered Investment Adviser, notes that Nelcast’s operational challenges appear transient. A pickup in commercial vehicle demand, coupled with efficiency measures, could stabilize margins and earnings from FY26 onward.
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Related Queries on Nelcast Q2 Performance and Margin Outlook
- Why Did Nelcast’s Profit Decline in Q2 FY26?
- How Are Margins Expected to Improve for Nelcast?
- Is Nelcast a Good Medium-Term Value Play?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
