Urbanization In India And Exports To USA Will Fuel Expansion

Key Takeaways

• Urbanization, infrastructure growth, and product innovation position the company for sustainable revenue and margin expansion across domestic and export markets.
  
• Operational efficiencies, value-added products, and new facilities are expected to boost profitability and protect margins from cost fluctuations.
  
• Exposure to volatile steel markets, price and innovation pressures in lighting, export risks, and structural shifts toward new materials threaten long-term growth and profitability.

Catalysts

Manufactures and markets steel pipes and tubes, lighting products, fans, home appliances, and PVC pipes in India.

• The company is positioned to benefit from India's ongoing urbanization and government-led infrastructure development, as shown by record-high steel pipe volumes and new capacity expansions targeting higher annual sales, which should drive topline revenue growth.
  
• Surya Roshni is leveraging policy tailwinds from increased emphasis on rural electrification and adoption of energy-efficient lighting by introducing innovative premium LED products and entering the domestic wiring and cable market, supporting sustainable revenue and margin expansion.
  
• The company’s strategic focus on value-added products (such as API, spiral, and galvanized pipes) — now comprising 44% of revenue in the Steel division — and operational efficiency improvements are strengthening margins and protecting EBITDA against input cost volatility.
  
• Ramp-up of new production facilities (such as the Spiral facility in Gwalior, cold rolling project in Bahadurgarh, and the forthcoming Hindupur plant) are expected to boost capacity utilization and lower per-unit costs, supporting future earnings and net margin improvement.
  
• Substantial export tailwinds, including sharply reduced tariffs on API pipes sold to the USA, are increasing competitiveness and opening high-margin international markets, likely to lift revenue and profit growth over the medium term.

Surya Roshni Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Surya Roshni's revenue will grow by 15.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.6% today to 6.2% in 3 years time.
• Analysts expect earnings to reach ₹7.2 billion (and earnings per share of ₹33.6) by about May 2028, up from ₹3.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.8x on those 2028 earnings, down from 18.3x today. This future PE is lower than the current PE for the IN Metals and Mining industry at 22.2x.
• Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.52%, as per the Simply Wall St company report.

Surya Roshni Future Earnings Per Share Growth

Risks

• The company’s steel segment remains vulnerable to fluctuations and potential long-term declines in HR coil prices and general steel overcapacity, as evidenced by the 5% revenue drop and 8% steel revenue contraction in FY '25, indicating exposure to cyclicality and price-based margin compression that could impair future earnings and revenue.
  
• The Lighting & Consumer Durable division is exposed to significant price erosion and intensifying competition; ongoing price pressures and limited innovation in premium smart lighting may result in lower net margins and stall revenue growth if the company cannot outpace technological change or maintain differentiation.
  
• Reliance on the export market—especially the US API oil and gas segment—presents risk if global energy decarbonization accelerates or geopolitical/trade barriers (like the current tariffs) re-emerge, threatening export revenues, realization, and future earnings streams.
  
• The company’s expansion and CapEx plans involve high upfront investments (₹500 crore over two years) in a competitive and potentially oversupplied steel and lighting market, which—if demand or execution falters—could lead to suboptimal returns, increasing risk to cash flows and return on capital employed.
  
• The long-term trend toward alternative materials (e.g., composites/plastics in pipes, OLED in lighting) and tightening carbon emissions regulations may erode Surya Roshni’s addressable market, require ongoing compliance investments, and squeeze margins, thereby posing structural risks to long-term revenue growth and profitability.

Valuation

• The analysts have a consensus price target of ₹312.0 for Surya Roshni based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹116.1 billion, earnings will come to ₹7.2 billion, and it would be trading on a PE ratio of 13.8x, assuming you use a discount rate of 13.5%.
  
• Given the current share price of ₹292.45, the analyst price target of ₹312.0 is 6.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.