Manaksia Steels Q2 FY26: Revenue Surge Masks Profit Decline and Margin Concerns

The stock traded at ₹63.32 on November 14, 2025, up 4.99% from the previous close, reflecting cautious optimism despite the profit decline. With a market capitalisation of ₹399.00 crores, Manaksia Steels remains a micro-cap player in the ferrous metals sector, navigating a challenging environment marked by volatile raw material costs and competitive pressures.

The quarter's results highlight a company in transition, with robust demand-driven revenue growth offset by operational challenges. The sequential decline in profitability, despite higher sales, points to margin pressures that warrant close scrutiny from investors evaluating the company's medium-term prospects.

Financial Performance: Strong Top Line, Weakening Profitability

Manaksia Steels' Q2 FY2026 revenue performance was undeniably impressive, with net sales reaching ₹262.67 crores—a 151.48% year-on-year surge and 20.77% quarter-on-quarter growth. This marked the highest quarterly revenue in the company's recent history, driven by improved capacity utilisation and favourable demand conditions in the steel products segment. On a half-yearly basis (H1 FY2026), revenue stood at ₹480.16 crores, representing significant growth momentum.

However, the profit picture was less encouraging. Net profit for Q2 FY2026 declined 30.66% quarter-on-quarter to ₹4.50 crores, down from ₹6.49 crores in Q1 FY2026, despite the strong revenue growth. Year-on-year, profit surged 312.84% from a low base of ₹1.09 crores in Q2 FY2025, but the sequential decline raises concerns about margin sustainability and cost management efficiency.

Operating profit (PBDIT excluding other income) for Q2 FY2026 stood at ₹12.43 crores, the highest in recent quarters, with an operating margin of 4.73%. However, this represented a marginal 21 basis point decline from Q1 FY2026's 4.94%, indicating that revenue growth did not translate proportionately into operating profitability. The company's PAT margin contracted sharply to 1.71% from 2.98% in the previous quarter, reflecting the impact of higher interest costs and normalising other income.

Interest expenses surged to ₹3.94 crores in Q2 FY2026—the highest in recent quarters—up from ₹2.75 crores in Q1 FY2026, reflecting increased working capital requirements and potentially higher borrowing costs. Other income declined significantly to ₹0.96 crores from ₹2.51 crores quarter-on-quarter, removing a key profit cushion. These factors combined to compress bottom-line performance despite the strong revenue trajectory.

Operational Challenges: Margin Pressures and Capital Efficiency Concerns

Beneath the headline revenue growth, Manaksia Steels faces structural challenges related to capital efficiency and profitability. The company's average return on capital employed (ROCE) over the past five years stands at just 10.32%, whilst the latest ROCE has deteriorated further to 2.41%—well below acceptable benchmarks for manufacturing companies. This suggests that the company is generating inadequate returns relative to the capital deployed in its business.

Return on equity (ROE) paints a similarly concerning picture, with the five-year average at 8.49% and the latest reading at 3.52%. These metrics indicate that Manaksia Steels is struggling to deliver attractive returns to shareholders, a critical weakness that limits its investment appeal. For context, healthy manufacturing companies typically target ROE levels above 15%, making Manaksia's performance notably subpar.

The balance sheet reveals a relatively healthy financial position with zero long-term debt as of March 2025 and shareholder funds of ₹289.36 crores. Current assets stood at ₹357.40 crores against current liabilities of ₹237.28 crores, providing adequate liquidity. However, the company's working capital intensity remains high, as evidenced by the substantial current assets base and rising interest costs, suggesting inefficiencies in managing receivables and inventory.

Employee costs have remained relatively stable at ₹6.51 crores in Q2 FY2026, up from ₹6.06 crores in the previous quarter, indicating controlled overhead expenses. Depreciation stood at ₹2.95 crores, reflecting ongoing capital expenditure to maintain production capacity. The company's fixed assets base of ₹56.07 crores as of March 2025 suggests a moderately asset-light model, though capacity expansion may be necessary to sustain growth momentum.

Industry Context: Navigating a Challenging Steel Landscape

Manaksia Steels operates in the highly competitive ferrous metals sector, characterised by cyclical demand patterns, volatile raw material prices, and intense pricing pressures. The company's product portfolio—cold rolled, galvanised, and colour-coated steel sheets and coils—serves diverse end-user industries including construction, automotive, and consumer durables, providing some demand diversification.

The Indian steel industry has faced headwinds in recent quarters due to fluctuating international steel prices, elevated coking coal costs, and competitive imports. Whilst infrastructure spending and construction activity have supported demand, margin pressures have intensified across the sector. Manaksia's ability to achieve 151.48% year-on-year revenue growth in Q2 FY2026 suggests market share gains or improved capacity utilisation, but sustaining this trajectory will require navigating ongoing industry challenges.

The company's ISO 9001:2015 accreditation provides a quality assurance framework, potentially differentiating its products in price-sensitive markets. However, as a micro-cap player with limited scale compared to larger integrated steel producers, Manaksia lacks the pricing power and cost advantages enjoyed by industry leaders. This structural disadvantage necessitates a focus on niche segments, customer relationships, and operational efficiency to remain competitive.

Peer Comparison: Valuation and Performance Benchmarking

Comparing Manaksia Steels with its peers in the ferrous metals sector reveals a mixed valuation picture. The company trades at a price-to-earnings ratio of 22.91x, slightly below the peer average, suggesting a modest valuation discount. However, this needs to be contextualised against its weak profitability metrics and below-average return on equity.

Manaksia Steels' ROE of 8.49% lags significantly behind peers like Mukand (14.80%) and Neetu Yoshi (36.93%), highlighting its capital efficiency challenges. The company's price-to-book ratio of 1.43x is reasonable compared to peers, but this valuation discount reflects market scepticism about the company's ability to improve returns. With a debt-to-equity ratio of 0.24, Manaksia maintains a conservative leverage profile, providing financial flexibility but also suggesting underutilisation of debt to drive growth.

The absence of dividend yield further limits the stock's appeal to income-focused investors. Whilst the company has maintained zero promoter pledging—a positive governance signal—institutional holding remains negligible at just 0.63%, indicating limited interest from sophisticated investors. This lack of institutional participation reflects concerns about the company's scale, profitability, and growth visibility.

Valuation Analysis: Expensive Relative to Fundamentals

Manaksia Steels currently trades at a valuation that appears stretched relative to its fundamental performance. With a P/E ratio of 22.91x, the stock commands a premium despite its weak return metrics and margin pressures. The company's valuation grade has oscillated between "Fair" and "Expensive" in recent months, currently standing at "Expensive" as of September 23, 2025, suggesting limited margin of safety at current prices.

The stock's price-to-book ratio of 1.43x appears reasonable on the surface, but when contextualised against an ROE of just 8.49%, the valuation premium becomes questionable. Typically, companies with single-digit ROE should trade closer to book value, making Manaksia's current multiple difficult to justify on fundamental grounds. The EV/EBITDA multiple of 12.78x further reinforces the expensive valuation narrative, particularly given the company's modest profitability and growth uncertainties.

The stock's 52-week range of ₹43.10 to ₹75.00 highlights significant volatility, with the current price of ₹63.32 positioned 15.57% below the high and 46.91% above the low. This suggests that whilst the stock has recovered from its lows, it remains well off its peak, reflecting ongoing investor uncertainty about the company's trajectory. The PEG ratio of 0.47 appears attractive, but this metric should be interpreted cautiously given the company's inconsistent profitability trends.

Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest

The shareholding structure of Manaksia Steels has remained remarkably stable over recent quarters, with promoter holding steady at 74.75% across the past five quarters. This high promoter stake signals strong management commitment and alignment with shareholder interests. Key promoters include Payal Agrawal (19.51%), Varun Agrawal (19.47%), founder Suresh Kumar Agrawal (18.85%), and Chandrakala Agrawal (16.40%), representing a family-controlled business model.

The complete absence of foreign institutional investors (FIIs), mutual funds, and insurance companies highlights the stock's limited appeal to institutional investors. Other domestic institutional investors (DIIs) hold a marginal 0.63%, whilst non-institutional investors account for 24.62% of the equity. This shareholding pattern suggests that the stock remains largely under the radar of professional fund managers, potentially due to concerns about liquidity, scale, and financial performance.

Positively, there is no promoter pledging, eliminating a key governance risk. However, the lack of institutional participation raises questions about the company's ability to attract sophisticated capital, which could limit share price appreciation and liquidity. For the stock to gain broader investor interest, the company will need to demonstrate sustained profitability improvements and clearer growth visibility.

Stock Performance: Stellar Long-Term Gains, Recent Underperformance

Manaksia Steels has delivered exceptional long-term returns, with the stock surging 804.57% over the past decade, significantly outperforming the Sensex's 230.19% return over the same period. This translates to an alpha of 574.38 percentage points, reflecting the company's transformation and recovery from earlier challenges. Over five years, the stock has returned 460.35%, again substantially ahead of the Sensex's 93.78% gain.

However, recent performance has been lacklustre. Over the past year, the stock has gained a mere 0.35%, significantly underperforming the Sensex's 9.00% return and generating negative alpha of 8.65 percentage points. Year-to-date returns of 5.17% also lag the broader market's 8.22% gain. The stock has also underperformed its sector, with the ferrous metals index returning 17.60% over the past year compared to Manaksia's 0.35%, highlighting sector-specific headwinds.

The stock's high beta of 1.50 indicates elevated volatility relative to the market, with annualised volatility of 57.95%—substantially higher than the Sensex's 12.26%. This high-risk profile, combined with recent underperformance, places the stock in the "High Risk Low Return" category based on one-year risk-adjusted metrics. The Sharpe ratio remains positive but modest, suggesting that investors are not being adequately compensated for the volatility they are assuming.

Investment Thesis: Mixed Signals Across Key Parameters

The investment case for Manaksia Steels presents a complex picture with conflicting signals across valuation, quality, financial trends, and technical indicators. The company's proprietary Mojo score of 42 out of 100 places it in the "Sell" category, reflecting concerns about fundamental strength and valuation sustainability.

On the positive side, the company's near-term financial trend is classified as "Positive," with Q2 FY2026 recording the highest quarterly revenue and operating profit in recent history. Revenue growth momentum has been strong, and the company appears to be benefiting from improved demand conditions. Technical indicators also paint a mildly bullish picture, with the stock trading above key moving averages and showing positive momentum on weekly charts.

However, these positives are offset by significant concerns. The company's quality grade remains "Below Average," reflecting weak return on capital employed (average ROCE of 10.32%) and return on equity (average ROE of 8.49%). These metrics indicate that the company struggles to generate attractive returns relative to the capital deployed, a fundamental weakness that limits its investment appeal. The "Expensive" valuation further compounds concerns, suggesting that current prices do not offer adequate margin of safety given the underlying fundamentals.

Key Strengths and Risk Factors

Outlook: Critical Monitoring Points Ahead

The coming quarters will be critical for Manaksia Steels. The company must demonstrate that its strong revenue growth can translate into sustainable profitability improvements. Key metrics to watch include operating margin trends, interest cost normalisation, and return on capital metrics. Without meaningful progress on these fronts, the stock's current valuation appears difficult to justify, particularly given the weak quality grade and recent underperformance.