I have tried to compare the scale that the management is claiming to achieve by 2030 to other trading giants from Japan and EU.
Japan is especially renown for having a trading dependent economy because it lacks many raw materials needed for industry and energy such as oil, coal, iron ore, copper, aluminum and wood. Japan must import most of these goods.
| Peers | Country | Latest Sales (in Cr) | EBITDA (in Cr) | EBITDA Margin | PE (TTM) | Remarks |
|---|---|---|---|---|---|---|
| Stemcor | UK | 16,600 | 423 | 2.6% | NA | steel trading |
| Marubeni (metals and minerals) | JP | 29,880 | 4,150 | 13.9% | 8.09 | not like for like |
| Mitsubishi (Materials) annualised | JP | 58,696 | 3,337 | 5.7% | 4.29 | not like for like. Gross profit in place of OP profit |
| JFE Shoji | JP | 84,531 | 2,806 | 3.3% | 7.71 | steel trading |
Most of these trading companies especially Japanese ones are decades old and are fairly large with buying offices in a large number of countries. This is what helps them with scale.
From glancing through their financials, a few questions come to my mind:
- How come SG Mart would be able to achieve 30,000 Cr in sales when half of these giant companies barely reach that number. Even if their growth trajectory sustains, some competition would inevitably enter the market like Japan. Having 1000-1500 Cr capital is not that big of a moat
- Sales realizations of a lot of these companies fluctuate along with steel prices year-on-year even though they have the advantage of having much larger reach and hedging capabilities. Once SG reaches a certain scale, it would be much harder for them to sustain their 5-10 day working capital cycle and their margins might also fluctuate.
Another question I have with investing in SG Mart is with respect to valuations. Here, you’re clearly paying for insane sales growth but since there’s no big moat, what is the exit multiple you would consider and how much of that is currently account for in the current stock price.
Shankara Building Products is also in trading business (more white label one compared to SG) and is in a sector with tailwinds (infra) but it hardly gets a PE of 16.
The valuations make sense if company is able to reach its 2030 vision and then it can give some outsized returns.
| FY24 | Jun-25 | TTM | FY25 (E) | FY26 (E) | FY27 (E) | FY30 (E) | |
|---|---|---|---|---|---|---|---|
| Sales | 2,683 | 1137 | 3,669 | 7000 | 12,000 | 18000 | 50,000 |
| Growth YoY | 161% | 71% | 50% | 41% | |||
| EBITDA | 62 | 24 | 85 | ||||
| % | 2.3% | 2.1% | 2.3% | 2.1% | 2.1% | 2.1% | |
| PAT | 61 | 27 | 87 | 140 | 240 | 360 | 1000 |
| % | 2.3% | 2.4% | 2.4% | 2% | 2% | 2% | 2% |
| Mcap | 4400 | 4400 | 4400 | 4400 | 4400 | 4400 | 4400 |
| PE | 72.1 | 50.6 | 31.4 | 18.3 | 12.2 | 4.4 |
