The recent evaluation update for Rathi Steel & Power centres on four key parameters: Quality, Valuation, Financial Trend, and Technicals. The financial trend has shifted from positive to flat, with the quarter ending September 2025 showing a subdued performance. While the company reported its highest quarterly net sales at ₹156.30 crores and a profit after tax (PAT) of ₹7.32 crores for the nine-month period, certain metrics indicate challenges. Interest expenses for the nine months rose by 47.49% to ₹5.59 crores, and PAT for the latest six months declined by 28.46% to ₹3.52 crores. Additionally, the inventory turnover ratio for the half-year was at a low 9.06 times, and cash and cash equivalents stood at ₹1.16 crores, the lowest in recent periods.
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From a quality perspective, Rathi Steel & Power’s grade has been revised from below average to average. Over the past five years, the company’s sales growth averaged 9.28% annually, while EBIT growth was recorded at 18.30%. The company maintains a negative net debt position and a modest net debt to equity ratio of 0.26. Return on capital employed (ROCE) averaged 14.07%, whereas return on equity (ROE) was comparatively lower at 3.39%. Institutional holding stands at 11.09%, with no pledged shares reported. These factors contribute to the company’s moderate quality standing within its peer group in the steel and sponge iron industry.
Valuation metrics present a mixed picture. The company’s ROCE of 7.4 and an enterprise value to capital employed ratio of 1.6 suggest an attractive valuation relative to peers. Despite this, the stock price has experienced significant volatility, trading at ₹27.97 as of the latest close, with a 52-week high of ₹51.95 and a low of ₹21.65. The stock’s one-year return of -37.34% contrasts sharply with the Sensex’s 9.48% gain over the same period, indicating substantial underperformance. However, profits have risen by 29.3% over the past year, and the PEG ratio is calculated at 1.1, reflecting the relationship between price, earnings growth, and valuation.
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Technically, the stock has shown some resilience with a day change of 0.79% and a one-month return of 12.74%, outperforming the Sensex’s 0.86% over the same period. However, the longer-term trend remains challenging, with year-to-date returns at -32.19% and a ten-year return of 703.74%, which, while impressive, is tempered by recent volatility. The company’s debt servicing capacity is a concern, given a high debt to EBITDA ratio of 141.19 times, which may impact financial flexibility.
In summary, the adjustment in Rathi Steel & Power’s evaluation reflects a nuanced view of its operational and market performance. While certain financial indicators such as net sales and profit after tax show strength, rising interest costs and subdued profitability in recent months temper the outlook. Quality metrics suggest an average standing within its sector, and valuation appears attractive relative to peers despite recent price declines. Investors may consider these factors alongside broader market conditions when analysing the stock’s prospects.
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