Surya Roshni Ltd Valuation Shifts to Very Expensive Amid Mixed Market Returns

Valuation Metrics and Recent Changes

Surya Roshni’s price-to-earnings (P/E) ratio currently stands at 17.52, a figure that has contributed to its reclassification as very expensive from previously expensive. This P/E level is notably higher than some of its peers such as Welspun Corp, which trades at a more attractive 14.14, and Jindal Saw, which is considered very attractive with a P/E of 10.75. The elevated P/E suggests that the market is pricing in significant growth expectations or premium quality, but it also raises the risk of valuation correction if earnings disappoint.

The price-to-book value (P/BV) ratio of 2.29 further underscores the premium valuation. While not extreme in isolation, this P/BV is above the sector average and indicates that investors are paying a substantial premium over the company’s net asset value. This contrasts with some peers like Jayaswal Neco, which trades at a fair valuation with a P/E of 19.7 but a lower EV/EBITDA multiple.

Enterprise value to EBITDA (EV/EBITDA) ratio is another critical metric where Surya Roshni’s 9.95 multiple places it in the very expensive category. This is slightly below Usha Martin’s 21.02 but higher than Welspun Corp’s 10.08 and Jindal Saw’s 6.92, signalling that while the company is not the most expensive on this front, it remains on the higher side relative to operational cash flow generation.

Operational Efficiency and Profitability

Despite the valuation premium, Surya Roshni demonstrates solid operational metrics. Its return on capital employed (ROCE) is a robust 19.42%, reflecting efficient use of capital in generating earnings before interest and tax. Return on equity (ROE) at 13.07% is respectable, though not exceptional, indicating moderate profitability for shareholders.

Dividend yield at 2.08% offers some income cushion, but it is modest compared to other investment opportunities in the sector. The company’s PEG ratio of 7.83 is particularly high, signalling that the stock’s price growth is outpacing earnings growth expectations, which may deter value-focused investors.

Price Performance and Market Context

Surya Roshni’s stock price has shown mixed returns over various time frames. While it has delivered an impressive 239.27% return over five years and a remarkable 644.57% over ten years, recent performance has been less encouraging. Year-to-date, the stock is down 4.11%, underperforming the Sensex’s 1.36% decline. Over the past year, the stock has declined 2.35%, whereas the Sensex gained 7.97%, highlighting a relative weakness in the company’s share price momentum.

Today, the stock closed at ₹263.95, up 3.65% from the previous close of ₹254.65, with intraday highs and lows of ₹264.55 and ₹254.85 respectively. The 52-week trading range of ₹205.30 to ₹358.30 indicates considerable volatility, with the current price sitting closer to the lower end of this spectrum, which may offer some near-term support.

Peer Comparison and Relative Valuation

When compared with its peer group within the Iron & Steel Products sector, Surya Roshni’s valuation appears stretched. Shyam Metalics, also rated very expensive, trades at a P/E of 25.78 and EV/EBITDA of 11.89, indicating that Surya Roshni is somewhat cheaper but still in the upper valuation tier. Conversely, companies like Jindal Saw and Welspun Corp offer more attractive valuations with P/E ratios of 10.75 and 14.14 respectively, and lower EV/EBITDA multiples, suggesting better price-to-earnings and operational cash flow value.

Other peers such as Sarda Energy and Gallantt Ispat L are classified as expensive but not very expensive, with P/E ratios around 17.3 and 29.17 respectively, and EV/EBITDA multiples significantly higher than Surya Roshni’s. This positions Surya Roshni in a challenging spot where it is neither the cheapest nor the highest quality in terms of valuation metrics.

Mojo Score and Rating Update

MarketsMOJO has recently downgraded Surya Roshni’s mojo grade from Hold to Sell as of 17 Nov 2025, reflecting concerns over valuation and price risk. The current mojo score of 35.0 is low, signalling weak overall fundamentals and market sentiment. The market capitalisation grade of 3 further indicates that the company is a small-cap with limited liquidity and higher volatility risk.

These rating changes underscore the need for investors to exercise caution, especially given the elevated valuation parameters and the stock’s underperformance relative to the broader market in recent periods.

Investment Implications and Outlook

Surya Roshni’s valuation shift to very expensive territory suggests that the stock is currently priced for perfection, leaving little margin for earnings disappointments or sector headwinds. While the company’s operational metrics such as ROCE and ROE remain solid, the high PEG ratio and premium multiples relative to peers raise concerns about sustainability of current price levels.

Investors should consider the stock’s recent price volatility and underperformance against the Sensex as signals to reassess portfolio exposure. The stock’s strong long-term returns over five and ten years are encouraging, but the near-term outlook is clouded by valuation pressures and a downgrade in mojo rating.

Conclusion

Surya Roshni Ltd’s recent valuation reclassification to very expensive, combined with a downgrade to a Sell mojo grade, signals increased price risk for investors. While the company maintains commendable operational efficiency and has delivered strong long-term returns, its current premium multiples relative to peers and historical averages warrant caution. Investors should closely monitor earnings trends and sector developments before committing fresh capital, considering alternative opportunities that offer better valuation support and growth prospects.

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