Manaksia Steels Ltd Downgraded to Hold Amid Technical Weakness Despite Strong Financials

Quality Assessment: Strong Fundamentals Amid Moderate Growth

Manaksia Steels continues to demonstrate solid operational quality, underpinned by a low average debt-to-equity ratio of 0.09 times, which indicates prudent financial management and limited leverage risk. The company’s return on capital employed (ROCE) stands at a respectable 8.4%, reflecting efficient utilisation of capital resources. Furthermore, the firm has delivered outstanding quarterly results for Q3 FY25-26, with net sales reaching a record ₹317.86 crores and PBDIT hitting ₹15.41 crores, the highest in recent history.

Net profit growth has been particularly impressive, surging by 113.56% in the latest quarter, supported by two consecutive quarters of positive earnings. Operating profit to interest coverage ratio also improved to 6.16 times, signalling strong earnings resilience relative to interest obligations. However, long-term growth metrics temper enthusiasm somewhat, with net sales growing at a compound annual rate of 14.38% and operating profit at 7.27% over the past five years, indicating moderate expansion in a competitive industry.

Valuation: Attractive Yet Reflective of Sector Norms

From a valuation standpoint, Manaksia Steels is trading at a fair value relative to its peers, with an enterprise value to capital employed ratio of 1.3, which suggests the stock is reasonably priced given its asset base and earnings potential. The company’s PEG ratio is an exceptionally low 0.1, highlighting significant earnings growth relative to its price, which typically signals undervaluation. This is further supported by a market capitalisation grade of 4, indicating a mid-sized firm with growth potential but also inherent risks associated with smaller capitalisation stocks.

Despite these positives, the stock’s recent price performance has lagged broader benchmarks. Over the past year, Manaksia Steels has generated a 16.50% return, outperforming the Sensex’s 8.64% gain, yet its year-to-date return is down 14.30%, considerably worse than the Sensex’s 3.19% decline. This divergence reflects market concerns about near-term momentum and technical positioning rather than fundamental weakness.

Financial Trend: Robust Quarterly Earnings but Mixed Long-Term Growth

Manaksia Steels’ recent financial trajectory has been impressive, with net profit growth of 113.56% in the latest quarter and a strong operating profit to interest coverage ratio of 6.16 times. The company’s net sales and PBDIT figures have reached all-time highs, underscoring operational efficiency and market demand. These results have been consistent over the last two quarters, signalling a positive earnings momentum.

However, the longer-term financial trend presents a more cautious picture. Over the past five years, net sales have grown at a modest 14.38% annually, while operating profit growth has been slower at 7.27%. This slower pace of expansion suggests that while the company is currently performing well, sustaining this momentum over the medium term may be challenging amid sectoral headwinds and competitive pressures.

Technical Analysis: Downgrade Driven by Weakening Momentum

The primary catalyst for the downgrade from Buy to Hold is the deterioration in technical indicators, which have shifted from mildly bullish to a sideways or bearish stance. Key technical metrics reveal a mixed to negative outlook:

• MACD: Both weekly and monthly charts show mildly bearish signals, indicating weakening momentum.
• RSI: No clear signal on weekly or monthly timeframes, suggesting indecision among traders.
• Bollinger Bands: Weekly readings are bearish, with monthly mildly bearish, pointing to increased volatility and potential downward pressure.
• Moving Averages: Daily charts remain mildly bullish, but this is insufficient to offset broader negative trends.
• KST (Know Sure Thing): Both weekly and monthly indicators are mildly bearish, reinforcing the momentum loss.
• Dow Theory: Weekly trend is mildly bullish, but monthly shows no clear trend, reflecting uncertainty.
• On-Balance Volume (OBV): Weekly is mildly bullish, but monthly volume trends are flat, indicating lack of strong buying interest.

These technical signals have contributed to a downgrade in the technical grade, which was the decisive factor in the overall Mojo Grade moving from Buy to Hold on 19 Feb 2026. The stock price has also reflected this shift, closing at ₹60.00 on 20 Feb 2026, down 3.12% from the previous close of ₹61.93, and trading well below its 52-week high of ₹77.52.

Comparative Performance and Market Context

Over longer horizons, Manaksia Steels has delivered strong returns, with a 5-year return of 199.25% and an impressive 10-year return of 751.06%, significantly outperforming the Sensex’s 62.11% and 247.96% respectively. However, the recent underperformance relative to the benchmark index and the technical deterioration have tempered enthusiasm among investors and analysts alike.

The company remains majority-owned by promoters, which often provides stability but also concentrates control. The ferrous metals sector continues to face cyclical challenges, including fluctuating raw material costs and demand variability, which may impact future earnings visibility.

Conclusion: Hold Rating Reflects Balanced View Amid Mixed Signals

In summary, Manaksia Steels Ltd’s downgrade to a Hold rating by MarketsMOJO reflects a balanced assessment of its current investment profile. The company’s strong financial performance, attractive valuation, and solid quality metrics are offset by weakening technical indicators and recent price underperformance. Investors should weigh the robust earnings growth and low leverage against the sideways technical trend and sectoral uncertainties.

For those considering exposure to the ferrous metals sector, Manaksia Steels remains a fundamentally sound option but with caution advised on timing and momentum. The Hold rating suggests monitoring the stock closely for signs of technical recovery before committing additional capital.

Limited Period Only. Start at Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Get 71% Off →