Manaksia Steels Ltd Upgraded to Strong Buy on Robust Financials and Technical Momentum

Quality Assessment: Exceptional Financial Health and Profitability

Manaksia Steels continues to demonstrate strong operational fundamentals, with a notably low average Debt to Equity ratio of 0.09 times, underscoring prudent financial management and limited leverage risk. The company’s return on capital employed (ROCE) stands at a healthy 8.4%, signalling efficient utilisation of capital to generate profits.

Quarterly results for Q3 FY25-26 have been particularly impressive. Net profit surged by 113.56%, while profit before tax excluding other income (PBT LESS OI) grew by 123.1% to ₹9.94 crores compared to the previous four-quarter average. Net sales expanded robustly by 50.5% to ₹317.86 crores, reflecting strong demand and operational execution. The operating profit to interest ratio reached an all-time high of 6.16 times, indicating excellent coverage of interest expenses and financial stability.

These metrics collectively contribute to the company’s elevated quality grade, reinforcing its position as a financially sound and profitable entity within the ferrous metals industry.

Valuation: Attractive Pricing Relative to Peers and Historical Benchmarks

Manaksia Steels is currently trading at ₹66.25, up 7.17% on the day, with a 52-week high of ₹77.52 and a low of ₹43.10. The stock’s enterprise value to capital employed ratio is a modest 1.4, suggesting the market values the company fairly relative to its capital base. This valuation is attractive when compared to peers and the company’s own historical averages.

Further supporting the valuation case is the company’s price/earnings to growth (PEG) ratio of 0.1, signalling that the stock is undervalued relative to its earnings growth potential. Over the past year, Manaksia Steels has delivered a total return of 15.68%, outperforming the Sensex’s 7.97% return, while profits have risen by an impressive 127.4%. This combination of strong earnings growth and reasonable valuation underpins the upgrade in the valuation parameter.

Financial Trend: Sustained Growth Amidst Sector Challenges

Manaksia Steels’ financial trajectory has been marked by consistent improvement, particularly in recent quarters. The company has reported positive results for two consecutive quarters, signalling a stabilising and upward trend in profitability. Over the last five years, net sales have grown at a compound annual growth rate (CAGR) of 14.38%, while operating profit has increased at 7.27% annually. Although these longer-term growth rates are moderate, the recent quarterly acceleration in sales and profits is a positive development.

Year-to-date, the stock has experienced a slight decline of 5.37%, but this is contrasted by a one-year return of 15.68% and a remarkable 5-year return of 234.60%, significantly outperforming the Sensex’s 63.78% over the same period. The 10-year return of 619.33% further highlights the company’s long-term value creation for shareholders.

These financial trends, combined with strong quarterly earnings growth, have contributed to the upgrade in the financial trend rating, reflecting improved momentum and earnings quality.

Technical Analysis: Shift to Bullish Momentum

The technical outlook for Manaksia Steels has notably improved, prompting the upgrade in its technical grade from mildly bullish to bullish. Key indicators reveal a mixed but increasingly positive picture. On a weekly and monthly basis, the Moving Average Convergence Divergence (MACD) remains mildly bearish, and the Relative Strength Index (RSI) shows no clear signal. However, Bollinger Bands on both weekly and monthly charts have turned bullish, indicating increased price momentum and volatility in the stock’s favour.

Daily moving averages are bullish, supporting short-term upward price trends. The Know Sure Thing (KST) indicator is bullish on both weekly and monthly timeframes, reinforcing the positive momentum. Dow Theory analysis shows a mildly bullish trend weekly, though no clear monthly trend is established. On-balance volume (OBV) remains neutral, suggesting volume has yet to decisively confirm the price move.

Overall, the technical indicators suggest a strengthening bullish trend, which has been reflected in the stock’s recent price appreciation from ₹61.82 to ₹66.25, with intraday highs reaching ₹66.62. This technical improvement has been a key driver behind the upgrade to a Strong Buy rating.

Comparative Performance and Shareholder Structure

Manaksia Steels has outperformed the broader market indices over multiple time horizons. Its 3-year return of 53.53% and 5-year return of 234.60% significantly exceed the Sensex’s 38.25% and 63.78% respectively. The 10-year return of 619.33% further cements the company’s track record of delivering substantial shareholder value.

The company’s promoter group remains the majority shareholder, providing stability and aligned interests with minority investors. This ownership structure supports confidence in management’s strategic direction and operational execution.

Risks and Considerations

Despite the positive outlook, investors should remain mindful of certain risks. The company’s long-term growth rates in net sales (14.38% CAGR) and operating profit (7.27% CAGR) over the past five years are moderate, which may limit upside potential if these trends persist. Additionally, the technical indicators, while improving, still show some mixed signals such as mildly bearish MACD and neutral OBV, suggesting that momentum could face intermittent challenges.

Sectoral factors affecting ferrous metals, including raw material price volatility and cyclical demand fluctuations, also warrant consideration. Nonetheless, the company’s strong recent financial performance and improved technical profile provide a compelling case for the upgraded rating.

Conclusion

The upgrade of Manaksia Steels Ltd’s investment rating to Strong Buy reflects a comprehensive improvement across four critical parameters: quality, valuation, financial trend, and technicals. The company’s robust quarterly earnings growth, attractive valuation metrics, sustained financial momentum, and a shift to bullish technical indicators collectively justify this positive reassessment. Investors seeking exposure to the ferrous metals sector may find Manaksia Steels an appealing candidate given its strong fundamentals and improving market sentiment.

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