Expediting expansions to tap rising growth opportunities
About the stock: Interarch Building Solutions (INTBUI) is one of leading turnkey pre-engineered steel construction solutions (PEB’s) providers in India. It commenced its operation in 1983, subsequently got listed in 2024.
• It is the 2nd largest player with capacity of over 2.2 lakh MT with a market share of ~7% in the PEB industry in India.
Q1FY27 performance: Interarch Building Solutions reported a healthy Q1FY27 performance, with revenue from operations increasing 21% YoY to ₹ 460 crore. EBITDA grew 25% YoY to ₹ 39 crore, while EBITDA margin expanded 27 bps YoY to 8.6%. However, PAT remained flat at ₹ 28 crore, as other income declined to ₹ 3 crore (versus ₹ 10 crore Q1FY26), leading to a 131 bps YoY contraction in PAT margin to 6.1%.
Investment Rationale:
• FY27 guidance retained; FY28 upped: Management reiterated FY27 revenue guidance of ₹ 2150-2200 crore (~13-16% YoY), supported by a record order book of ~₹ 1,864 crore, while EBITDA margin is expected to remain flattish YoY. It upped its revenue guidance for FY28 to ₹ 2700 crore (earlier ₹ 2500 crore) along with higher EBITDA margins of 9.5-10% (FY26 EBITDA margin – 9.3%). The Andhra Pradesh heavy structures facility (80,000 MT) is expected to get operational in phases during Q2FY27 (25,000 MT), Q4FY27 (24,000 MT) and Q3FY28 (31,000 MT). It commissioned Phase I of Gujarat facility (20,000 MT) in July 2026 while Phase II of 20,000 MT is expected to get operational during Q2FY27. Consequently, the company’s annual capacity is slated to increase from 221,000 MT currently to 336,000 MT by FY27.
• QIP size increased 2.5x to expedite expansions: The company has raised its planned QIP size to ₹ 250 crore from ₹ 100 crore earlier. As per management, it plans to expedite its capacity expansion plans. The QIP funds are expected to be utilised towards AP heavy Ph II & III (₹ 140-150 crore), new Gujarat plant (₹ 50-60 crore) and for investment in ER Steel JV (₹ 50-60 crore). It plans to set up a 15,000 MT plant for its Canadian JV venture (76% stake) over the 2-3 year period, which has the potential to generate revenues of ₹ 200+ crore with 20% EBITDA margins. The phase I of 4000-5000 MT (₹ 70-75 crore revenue potential) is expected to start by July 2027. It has also approved sub-division (stock split) of equity shares having ₹ 10 face value to ₹ 2 face value.
Rating and Target Price:
• We retain Buy with a revised price target of ₹ 2300, i.e. 22x P/E on FY28E EPS.
