The company's shares closed at ₹439.55 on February 11, 2026, down 1.15% on the day and trading 49.48% below their 52-week high of ₹870.00. Despite the impressive quarterly profit rebound, the stock's proprietary Mojo Score stands at a dismal 28 out of 100, firmly in "Strong Sell" territory, reflecting deep-seated concerns about financial trends, technical momentum, and competitive positioning.
The September 2025 quarter results present a study in contrasts. On one hand, revenue jumped 62.39% quarter-on-quarter to ₹174.62 crores, reversing the 29.95% contraction witnessed in Q1 FY26. Operating margins expanded sharply to 18.20% from a concerning 12.59% in the previous quarter, whilst profit after tax margins improved to 12.19% from 6.88%. Year-on-year comparisons also paint a positive picture, with net sales advancing 14.72% and net profit climbing 22.09%.
Yet beneath this surface-level recovery lies a pattern of volatility and inconsistency that has spooked investors. The company's financial trend classification has deteriorated to "Negative" as of December 2025, down from "Positive" status in March 2023. This downgrade reflects structural concerns that a single strong quarter cannot erase, particularly when viewed against the backdrop of a challenging Q3 FY26 (October-December 2025) that likely contributed to the stock's recent technical breakdown.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 174.62 | +62.39% | 21.28 | +187.57% | 18.20% | 12.19% |
| Jun'25 | 107.53 | -29.95% | 7.40 | -59.03% | 12.59% | 6.88% |
| Mar'25 | 153.50 | +11.19% | 18.06 | +31.73% | 15.75% | 11.77% |
| Dec'24 | 138.05 | -9.31% | 13.71 | -21.34% | 15.06% | 9.93% |
| Sep'24 | 152.22 | +7.95% | 17.43 | -50.38% | 16.62% | 11.45% |
| Jun'24 | 141.01 | -18.91% | 35.13 | +55.79% | 15.50% | 24.91% |
| Mar'24 | 173.89 | — | 22.55 | — | 14.92% | 12.97% |
Financial Performance: Recovery Amid Persistent Volatility
The September 2025 quarter's financial performance showcased Bajaj Steel's ability to bounce back from operational challenges, but also highlighted the company's susceptibility to sharp swings in profitability. Net sales of ₹174.62 crores represented the second-highest quarterly revenue in the past seven quarters, trailing only the March 2024 quarter's ₹173.89 crores. The 62.39% sequential jump reversed the alarming 29.95% contraction witnessed in Q1 FY26, suggesting demand conditions improved significantly as the quarter progressed.
Operating profit excluding other income surged to ₹31.78 crores from ₹13.54 crores in the previous quarter, driving the operating margin expansion to 18.20%—the highest level recorded in the trailing seven quarters. This margin improvement reflects better absorption of fixed costs amid higher revenue realisation, coupled with disciplined cost management. Employee costs rose modestly to ₹22.54 crores from ₹20.37 crores, maintaining reasonable alignment with revenue growth.
However, the quality of earnings warrants scrutiny. Other income contributed ₹1.55 crores in Q2 FY26, a relatively modest figure compared to the exceptional ₹6.49 crores recorded in Q4 FY25 and ₹12.23 crores in Q4 FY24. This volatility in non-operating income has historically distorted profitability trends, with the June 2024 quarter's ₹35.13 crores net profit being materially aided by ₹2.54 crores in other income alongside a gross margin of 35.39%—an outlier that has not been replicated since.
The annual performance trajectory reveals a company struggling to achieve consistent growth momentum. For FY25, net sales advanced a modest 6.20% to ₹584.00 crores, whilst net profit surged 42.37% to ₹84.00 crores—a seemingly impressive jump that was largely driven by margin expansion rather than top-line acceleration. Operating margin (excluding other income) improved to 15.80% in FY25 from 14.50% in FY24, whilst PAT margin jumped to 14.40% from 10.70%. Yet over a five-year horizon, sales growth has averaged just 7.36% annually, whilst EBIT growth of 14.22% reflects improving operational efficiency from a low base.
Earnings Quality Concern: Non-Operating Income Volatility
Bajaj Steel's profitability has been materially influenced by volatile other income streams. The June 2024 quarter saw other income of ₹2.54 crores contributing to an exceptional gross margin of 35.39% and net profit of ₹35.13 crores—figures that have proven unsustainable. In Q2 FY26, other income moderated to ₹1.55 crores, representing just 4.65% of operating profit. Investors should focus on core operating performance rather than headline profit numbers that can be distorted by non-recurring items.
Operational Challenges: Margin Pressure and Growth Concerns
Despite the Q2 FY26 recovery, Bajaj Steel's operational performance reveals structural challenges that have weighed on investor sentiment. The company's return on equity (ROE) stands at 21.53% on an average basis and 14.60% for the latest period—respectable figures that indicate reasonable capital efficiency, but down from historical peaks. More concerning is the return on capital employed (ROCE), which averaged a robust 38.14% over the long term but has declined to 20.56% in the latest period, reflecting pressure on asset productivity.
The balance sheet, whilst healthy, shows signs of modest leverage creep. Long-term debt increased to ₹29.78 crores as of March 2025 from ₹23.95 crores a year earlier, though the company maintains a net cash position with ₹86.00 crores in closing cash against total debt of approximately ₹30 crores. The debt-to-EBITDA ratio of 0.66 remains comfortably low, whilst EBIT-to-interest coverage of 12.07 times provides substantial cushion against financial stress. Shareholder funds expanded to ₹387.42 crores from ₹332.14 crores, driven by retained earnings rather than equity dilution—the share capital jump from ₹2.60 crores to ₹10.40 crores reflects a stock split rather than fresh issuance.
Working capital management presents a mixed picture. Current assets stood at ₹358.80 crores against current liabilities of ₹182.53 crores as of March 2025, providing a healthy current ratio of approximately 1.96. However, cash flow from operations has shown volatility, declining to ₹52.00 crores in FY25 from ₹55.00 crores in FY24, despite higher profitability. This divergence stems from adverse working capital movements, with ₹41.00 crores absorbed in FY25 compared to ₹14.00 crores in the prior year. The debtors turnover ratio improved to 15.80 times on a half-yearly basis, indicating faster collections, but inventory and payables dynamics appear to have tightened cash generation.
Critical Concern: Deteriorating Financial Trend Classification
Bajaj Steel's financial trend classification has degraded sharply from "Positive" in March 2023 to "Negative" as of December 2025. Key factors driving this downgrade include quarterly PAT falling 56.90% in the latest assessed period, quarterly operating profit to net sales ratio hitting a low of 7.43%, and non-operating income comprising 47.81% of profit before tax. Whilst Q2 FY26 showed recovery, the subsequent Q3 FY26 likely witnessed renewed pressure, contributing to the negative trend assessment and bearish technical breakdown.
Industry Context: Struggling in a Competitive Manufacturing Landscape
Bajaj Steel operates in the highly competitive industrial manufacturing sector, where it ranks as the second-largest company by market capitalisation within its immediate peer group—though its ₹923.00 crores market cap pales in comparison to larger diversified industrial conglomerates. The company's niche focus on steel re-rolling and cotton ginning machinery positions it in cyclical end-markets that are heavily influenced by agricultural demand, infrastructure spending, and raw material cost fluctuations.
The sector itself has delivered modest returns over the past year, with the industrial manufacturing index advancing just 0.53%—a figure that Bajaj Steel has dramatically underperformed by 34.23 percentage points. This underperformance reflects company-specific challenges rather than sector-wide headwinds, suggesting operational or competitive issues that have eroded investor confidence. The company's micro-cap classification (market cap below ₹1,000 crores) also subjects it to lower liquidity and higher volatility compared to larger peers, amplifying price swings during periods of uncertainty.
Capacity utilisation trends, raw material cost dynamics, and competitive intensity remain key variables that will determine Bajaj Steel's ability to sustain margin improvements witnessed in Q2 FY26. The company's fixed asset base expanded to ₹175.23 crores in FY25 from ₹147.97 crores in FY24, indicating ongoing capital expenditure of ₹38.00 crores during the year. This investment suggests management's confidence in future demand, but the return on these assets will be critical to watch in coming quarters.
| Metric | FY25 | FY24 | FY23 | FY22 | FY21 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 584.00 | 550.00 | 533.00 | 436.00 | 510.00 |
| YoY Growth | +6.20% | +3.20% | +22.20% | -14.50% | +23.20% |
| Operating Margin | 15.80% | 14.50% | 17.10% | 11.70% | 18.00% |
| PAT (₹ Cr) | 84.00 | 59.00 | 67.00 | 36.00 | 65.00 |
| PAT Margin | 14.40% | 10.70% | 12.60% | 8.30% | 12.70% |
Peer Comparison: Attractive Valuation, Weak Momentum
Relative to its industrial manufacturing peers, Bajaj Steel presents an interesting valuation proposition that is overshadowed by concerning operational and technical trends. The company trades at a price-to-earnings ratio of 15.12 times trailing twelve-month earnings—a significant discount to the peer group average of approximately 44 times and well below the broader industry P/E of 81 times. This valuation gap reflects the market's scepticism about earnings sustainability and growth prospects.
On a price-to-book basis, Bajaj Steel's 2.21 times multiple appears reasonable compared to peers like Mamata Machinery (5.90x), Gala Precision Engineering (3.79x), and MIC Electronics (4.51x). However, the company's superior return on equity of 21.53% versus the peer average of approximately 13% suggests this valuation discount may be warranted given the execution challenges and volatile earnings trajectory. The dividend yield of 0.23% is negligible, with a payout ratio of just 2.47% indicating management's preference to retain earnings for reinvestment rather than reward shareholders—a strategy that requires demonstrable growth to justify.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|
| Bajaj Steel Inds | 15.12 | 2.21 | 21.53 | -0.13 | 0.23 |
| Mamata Machinery | 24.74 | 5.90 | 24.38 | -0.11 | 0.12 |
| Gala Precis. Eng | 30.15 | 3.79 | 11.20 | -0.09 | — |
| Eimco Elecon(I) | 25.48 | 2.54 | 4.92 | -0.04 | 0.29 |
| MIC Electronics | 110.78 | 4.51 | 10.74 | 0.16 | — |
| Indef Manufactur | 30.91 | 3.57 | 11.76 | -0.01 | 0.71 |
Bajaj Steel's net cash position (debt-to-equity of -0.13) stands out favourably against the peer group, providing financial flexibility that could be leveraged for growth initiatives or shareholder returns. However, the company's 1-year stock return of -33.70% contrasts starkly with the sector's modest +0.53% gain, highlighting a significant loss of investor confidence that cheap valuations alone have failed to reverse.
Valuation Analysis: Attractive Entry Point or Value Trap?
Bajaj Steel's current valuation presents a classic dilemma for value investors: whether the stock represents a compelling entry point for patient capital or a value trap where cheap multiples reflect justified concerns about business quality and growth sustainability. At ₹439.55, the stock trades at 15.12 times trailing earnings and 2.21 times book value—multiples that appear attractive on a standalone basis and particularly compelling relative to the broader market and sector.
The company's valuation grade has fluctuated between "Expensive," "Fair," and "Attractive" over the past nine months, currently sitting at "Attractive" since June 16, 2025. This classification reflects the substantial price correction from the 52-week high of ₹870.00, which has brought valuations down to levels that theoretically compensate for execution risks. The enterprise value-to-EBITDA multiple of 9.52 times and EV-to-sales of 1.50 times suggest reasonable pricing relative to cash flow generation capacity.
However, valuation attractiveness must be weighed against fundamental deterioration and technical weakness. The stock's 49.48% decline from its 52-week high reflects more than just market sentiment—it signals genuine concerns about the company's ability to sustain the margin improvements and profit growth witnessed in Q2 FY26. The negative financial trend classification, bearish technical setup, and weak momentum indicators suggest that value investors attempting to "catch a falling knife" may face further downside before a sustainable bottom is established.
A fair value estimate based on normalised earnings and peer multiples suggests the stock could trade in a range of ₹380-480 over the next 12 months, implying limited upside of approximately 9% from current levels in a base case scenario. For the stock to re-rate meaningfully higher, Bajaj Steel would need to demonstrate consistent quarterly performance, sustained margin expansion, and accelerated revenue growth—outcomes that remain uncertain given recent volatility.
Shareholding Pattern: Promoter Consolidation Amid Retail Exit
The shareholding pattern reveals intriguing dynamics that provide insight into ownership conviction and institutional interest. Promoter holding increased sharply to 56.62% in the December 2025 quarter from 48.27% in the preceding three quarters, representing an 8.35 percentage point sequential jump. This consolidation suggests promoter confidence in the company's long-term prospects, though the timing—coinciding with the stock's technical breakdown—raises questions about whether this represents opportunistic accumulation or defensive positioning.
The promoter group, led by entities like Vidarbha Tradelinks Private Limited (16.39%), Sidhi Vinimay Private Limited (15.19%), and Rohit Bajaj (14.76%), maintains zero pledging of shares—a positive indicator of financial stability and long-term commitment. However, the flip side of rising promoter holding is the corresponding decline in non-institutional (retail) shareholding, which dropped to 43.34% from 51.67% sequentially. This 8.33 percentage point exodus suggests retail investors are losing patience with the stock's underperformance and volatile earnings trajectory.
| Quarter | Promoter % | QoQ Change | FII % | MF % | Non-Inst % |
|---|---|---|---|---|---|
| Dec'25 | 56.62 | +8.35 | 0.04 | 0.00 | 43.34 |
| Sep'25 | 48.27 | 0.00 | 0.06 | 0.00 | 51.67 |
| Jun'25 | 48.27 | 0.00 | 0.15 | 0.00 | 51.57 |
| Mar'25 | 48.27 | 0.00 | 0.07 | 0.00 | 51.59 |
| Dec'24 | 48.27 | — | 0.08 | 0.00 | 51.65 |
Institutional participation remains negligible, with foreign institutional investors (FIIs) holding a minuscule 0.04%, mutual funds at 0.00%, and other domestic institutional investors (DIIs) at 0.01%. This absence of institutional ownership reflects the stock's micro-cap status, limited liquidity, and lack of research coverage—factors that constrain price discovery and amplify volatility. The single FII investor and zero mutual fund presence indicate that Bajaj Steel has failed to attract professional money despite attractive valuations, likely due to concerns about earnings quality, governance, or growth visibility.
Stock Performance: Severe Underperformance Across All Timeframes
Bajaj Steel's stock price performance over the past year has been nothing short of catastrophic for investors, with the shares declining 33.70% whilst the Sensex advanced 10.41%—a negative alpha of 44.11 percentage points. This dramatic underperformance extends across multiple timeframes, with the stock down 24.05% over three months, 14.14% over six months, and 12.41% year-to-date as of February 11, 2026. The only silver lining appears in longer-term returns, with the stock up 42.09% over two years and 96.88% over three years, though these gains have been substantially eroded by recent weakness.
The technical picture is uniformly bearish across all major indicators. The stock trades below all key moving averages—5-day (₹446.04), 20-day (₹438.58), 50-day (₹475.86), 100-day (₹516.10), and 200-day (₹577.21)—a configuration that signals sustained downward momentum. The MACD indicator shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands suggest continued bearish pressure. The KST oscillator and Dow Theory indicators similarly point to negative trend continuation.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | -1.15% | -0.05% | -1.10% |
| 1 Week | -2.97% | +0.50% | -3.47% |
| 1 Month | -6.14% | +0.79% | -6.93% |
| 3 Month | -24.05% | +0.43% | -24.48% |
| 6 Month | -14.14% | +4.50% | -18.64% |
| YTD | -12.41% | -1.16% | -11.25% |
| 1 Year | -33.70% | +10.41% | -44.11% |
| 2 Years | +42.09% | +17.65% | +24.44% |
| 3 Years | +96.88% | +38.81% | +58.07% |
The stock's beta of 1.23 indicates higher volatility than the broader market, with annualised volatility of 49.42% over the past year—more than four times the Sensex's 11.52%. This elevated volatility, combined with negative returns, has resulted in a negative Sharpe ratio, classifying the stock in the "HIGH RISK LOW RETURN" category. Risk-adjusted returns of -0.68 contrast starkly with the Sensex's positive 0.90, underscoring the opportunity cost of holding Bajaj Steel over the past year.
The trend officially changed to "Bearish" on December 26, 2025, at ₹497.85, following a brief period of "Mildly Bearish" classification. Since that breakdown, the stock has declined an additional 11.72% to current levels, with immediate support at the 52-week low of ₹405.15 just 8.49% below current prices. Resistance is layered at multiple levels—the 20-day moving average at ₹438.58 represents immediate overhead supply, whilst the 100-day average at ₹516.10 and 200-day at ₹577.21 constitute formidable barriers to any recovery attempt.
Investment Thesis: Mojo Score of 28 Signals Strong Sell
The proprietary Mojo Score of 28 out of 100 places Bajaj Steel firmly in "Strong Sell" territory, reflecting a comprehensive assessment across four key dimensions: valuation, quality, financial trend, and technical momentum. Whilst the valuation component scores positively at "Attractive" levels, this single strength is overwhelmed by negative readings across the other three critical parameters.
The quality assessment rates Bajaj Steel as "Average," acknowledging the company's reasonable return on equity of 21.53%, strong ROCE of 38.14% on an average basis, and zero debt burden. However, this average quality grade has been downgraded from "Good" status prior to February 2024, reflecting concerns about earnings consistency and growth sustainability. The 5-year sales growth of just 7.36% and EBIT growth of 14.22% fall short of what would be expected from a high-quality compounder, whilst the negligible institutional holding of 0.05% suggests professional investors remain unconvinced about the investment case.
The financial trend component registers as "Negative," driven by the deterioration witnessed in recent quarters. Key negative factors include quarterly PAT falling 56.90% in the latest assessed period, operating profit to net sales ratio hitting a low of 7.43%, and non-operating income comprising an unsustainable 47.81% of profit before tax. Whilst the September 2025 quarter showed improvement, the subsequent October-December 2025 period likely witnessed renewed pressure, contributing to the negative classification and the stock's technical breakdown in late December.
The technical trend assessment is unambiguously "Bearish," with all major indicators pointing to continued downside risk. The stock's position below all key moving averages, negative MACD readings, and bearish Bollinger Band configuration suggest the path of least resistance remains lower. The 49.48% decline from the 52-week high of ₹870.00 has yet to establish a credible bottoming pattern, with the 52-week low of ₹405.15 representing the next logical support level just 8% below current prices.
KEY STRENGTHS ✅
- Strong Q2 FY26 Recovery: Net profit surged 187.57% QoQ to ₹21.28 crores, with operating margins expanding to 18.20%
- Healthy Balance Sheet: Net cash position with debt-to-equity of -0.13, providing financial flexibility
- Superior ROE: Return on equity of 21.53% outpaces peer group average of ~13%, indicating efficient capital deployment
- Attractive Valuation: P/E of 15.12x and P/BV of 2.21x represent significant discounts to sector multiples
- Zero Promoter Pledging: Clean shareholding structure with promoters increasing stake to 56.62%
- Adequate Interest Coverage: EBIT-to-interest ratio of 12.07x provides comfortable debt servicing cushion
- Long-term Track Record: 3-year return of 96.88% and 5-year return of 389.61% demonstrate historical wealth creation
KEY CONCERNS ⚠️
- Severe Stock Underperformance: 1-year return of -33.70% vs Sensex +10.41%, with negative alpha of -44.11%
- Negative Financial Trend: Classification downgraded to "Negative" from "Positive," reflecting structural deterioration
- Bearish Technical Setup: Trading below all key moving averages with uniformly bearish indicators across timeframes
- Earnings Volatility: Quarterly profit swings from ₹35.13 crores to ₹7.40 crores to ₹21.28 crores raise sustainability concerns
- Weak Revenue Growth: 5-year sales CAGR of just 7.36% indicates limited top-line momentum
- Zero Institutional Interest: No mutual fund holding, negligible FII presence at 0.04% signals lack of professional conviction
- High Volatility: Beta of 1.23 and annualised volatility of 49.42% create unfavourable risk-return profile
Outlook: What to Watch
The outlook for Bajaj Steel hinges on the company's ability to sustain the operational improvements witnessed in Q2 FY26 whilst navigating a challenging competitive landscape and unfavourable technical momentum. Investors should monitor several key variables that will determine whether the current valuation represents a genuine opportunity or a value trap in the making.
POSITIVE CATALYSTS 📈
- Sustained Margin Expansion: Maintaining operating margins above 16% for consecutive quarters would signal structural improvement
- Revenue Acceleration: Achieving double-digit sales growth consistently would validate capacity expansion investments
- Institutional Participation: Entry of mutual funds or increased FII holding would improve liquidity and sentiment
- Technical Reversal: Reclaiming the 200-day moving average at ₹577 would signal trend change and attract momentum buyers
- Working Capital Efficiency: Improving cash conversion and reducing working capital absorption would strengthen cash flows
RED FLAGS 🚩
- Q3 FY26 Disappointment: Renewed profit contraction or margin compression would confirm negative trend assessment
- Break Below ₹405: Breach of 52-week low would open downside to ₹350-380 zone with limited technical support
- Promoter Stake Reduction: Any reversal of recent promoter buying would signal loss of insider confidence
- Further Retail Exodus: Continued decline in non-institutional holding below 40% would worsen liquidity
- Margin Reversal: Return to sub-15% operating margins would indicate Q2 FY26 was an aberration rather than inflection
The next quarterly result for Q3 FY26 (October-December 2025) will be critical in determining whether the September quarter's strong performance represents a sustainable turnaround or a temporary respite. Given the stock's technical breakdown in late December and the negative financial trend classification, there is a high probability that Q3 results disappointed, contributing to the severe price correction. Investors should await clarity on this quarter's performance before making any fresh commitments.
From a technical perspective, the stock needs to reclaim the 20-day moving average at ₹438.58 as a first step towards stabilisation, followed by a sustained move above the 50-day average at ₹475.86 to signal a potential trend reversal. Until such technical repair occurs, the risk-reward remains unfavourable for fresh purchases, with downside risks to the 52-week low of ₹405.15 or potentially lower levels if fundamental deterioration continues.
The Verdict: Avoid Until Trend Reversal Confirmed
Score: 28/100
For Fresh Investors: Avoid initiating positions despite attractive valuations. The combination of negative financial trends, bearish technical setup, severe underperformance, and lack of institutional interest creates an unfavourable risk-reward profile. Wait for concrete evidence of sustained operational improvement and technical trend reversal before considering entry.
For Existing Holders: Consider reducing exposure on any technical bounce towards ₹460-480 levels. The 33.70% decline over the past year and deteriorating fundamentals suggest the pain may not be over. Only long-term investors with high risk tolerance and conviction in management's turnaround ability should maintain holdings, whilst closely monitoring quarterly results and technical levels.
Fair Value Estimate: ₹380-480 (implying -13% to +9% from current levels). Downside risks outweigh upside potential until financial trend improves and technical damage is repaired.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
