SRM Contractors Q2 FY26 Results: PAT up 94%, On-track FY26 Guidance
Guidance of 75% growth in FY26. 2X in FY27. Stable margins, steady order-inflows, strong revenue visibility. SRM at reasonable valuations based on guidance
1. Engineering Procurement Construction Company
srmcpl.com | NSE: SRM
Operates in high-margin, high-entry-barrier hilly terrain EPC niche.
2. FY23–25: PAT CAGR of 71% & Revenue CAGR of 34%
3. FY25: PAT up 104% & Revenue up 55% YoY
Growth driven by road, bridge, and slope stabilization projects in J&K, Uttarakhand, and Gujarat.
J&K (41%), Uttarakhand (20%), Gujarat (18%), Ladakh (10%), Himachal (7%), Odisha (4%).
Margin improvement came from clustering of projects, equipment ownership, and backward integration.
Focus on clustering projects in J&K, Ladakh, Himachal, Uttarakhand to optimize logistics and margins.
IPO in FY25
Forayed into hydropower & aerial ropeways (planned vertical diversification).
4. Q2 FY26: PAT up 94%, Revenue up 112% YoY
PAT up 58% & Revenue up 44% QoQ
5. H1 FY26: PAT up 117% & Revenue up 128% YoY
6. Business Metrics: Strong & Improving Returns
ROE muted by IPO funds in FY24 — yet to recover to FY23 levels
7. Outlook: 75% Revenue Growth in FY26
7.1 Guidance
FY26:
Looking ahead to financial year 2026, we are confident of achieving revenues in the range of INR900 to INR1,000 crores, with EBITDA margin firmly in higher double-digit zone
When when I say 900 to 1,000 it is from standalone SRM and 350 to 450 we are expecting from Maccaferri. So, we are having something 1100 to 1200 for consolidated.
EBITDA Margin: around 18 20%
FY27 Consolidated Revenue: I think it’s 2000 to 2200 for 26 27
Margin will be the same
FY26 revenue of ₹950 Cr assumed at midpoint of ₹900-1000 Cr guidance implies a 75% growth over FY25
7.2 H1 FY26 vs FY26 Guidance — SRM Contractors
On-track FY26 guidance on revenue growth
Revenue:
70% of FY25 revenue was delivered in H2
For FY26 if we assume 65% revenue to be delivered in H2, it implies a FY26 revenue of ~₹1,000 Cr, in-line with management guidance
The ₹1,552 cr order book to be executed in 18-24 months provides strong revenue visibility.
Margins:
H1-26 PAT margin of 9.4% is marginally below the 10% guidance given
EBITDA at ~15% is significantly weaker than the 18-20% guidance.
With H2 expected to be the stronger half of the year, there is a chance to catch up. This provides an opportunity to meet the guidance.
Strong Order-book: Confidence in Guidance Execution
Average Completion Time : 18 to 24 Month
Tenders under Evaluation and in pipeline – 5252 Crores and Tenders in pipeline ( HAM Projects ) – 2157 crores
8. Valuation Analysis
8.1 Valuation Snapshot — SRM Contractors
CMP ₹528.2; Mcap ₹1,200.4 Cr;
Attractive Forward Valuation:
On FY26(E), SRM looks reasonably valued to attractive: EV/EBITDA ~6.6×, P/E ~12.8×, EV/Sales ~1.26× with net cash.
If ~₹900 Cr revenue and ~₹90 Cr PAT materialize, stock could see re-rating back to high-teens
8.2 Opportunity at Current Valuation
Valuation Upside: Acquisition impact not considered in the valuation analysis as SRM has not yet consolidated it in their results. Valuations would become more attractive based on consolidated numbers
~2x FY27 Revenue: Revenue doubling to ₹2,000+ Cr on a consolidated basis is not discounted in the price
Margin of safety: With single digit P/E for FY27(E) – valuations are not demanding
Provides a margin of safety if one quarter is weak
Sector Tailwinds: Government’s thrust on border connectivity, tunnels, highways, and hill-road infra aligns with SRM’s niche skill
Execution in high-entry-barrier terrains creates sustainable edge
Maccaferri acquisition: Advanced geotechnical/soil stabilization capabilities, and nationwide client base—broadening SRM’s portfolio and margins.
8.3 Risk at Current Valuation
Guidance Execution: FY27 expectation of ~₹2,000 Cr consolidated revenue is doubling from the FY26 expectation of ~₹1,000 Cr. This would need strong execution
Execution & Seasonality: Operations in high-altitude terrains face weather disruptions, short working seasons, and risk of cost/time over-runs.
Government Dependence: Heavy reliance on NHAI, NHIDCL, BRO, and state bodies
Exposes SRM to policy changes, budget allocations, and payment delays.
HAM Exposure Ahead: Planned diversification into HAM projects adds equity-funding and life-cycle risks beyond EPC.
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