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INVESTMENT INSIGHTS

Check Before You Invest : Rathi Steel & Power Ltd

BSE: 504903 NSE: ISIN: INE336C01016
  |   Sector:  Metals & Mining   |   Industry:  Steel & Iron Products

Snapshot

Q.1 Which industry/sub-sector does Rathi Steel & Power Ltd belong to?
Rathi Steel & Power Ltd belongs to the Metals & Mining sector, operating specifically within the Steel & Iron Products segment.
Q.2 Is Rathi Steel & Power Ltd a good quality company?
Rathi Steel & Power Ltd is a average quality company, based on a somewhat consistent multi-year financial track record.

This assessment is based on company’s performance on Revenue growth, ROCE, Equity and Assets, key margin ratios, cash conversion cycle, and debt to cash flow from operations and how it compares with its long term averages.

Q.3 Is Rathi Steel & Power Ltd undervalued or overvalued?
Rathi Steel & Power Ltd appears Fair, as its key valuation ratios are in line with their past averages.

Based on the industry it operates in, the relevant valuation ratios include one of the following, P/E, P/BV, P/Sales, EV/EBITDA or a combination of two or more.

Valuation Ratios Current 5-year
Historic Median
Price to Earnings 16.79 1.88
Price to Book 1.18 -0.02
Price to Sales 0.25 0.23
EV to EBITDA 7.03 12.36
Q.4 Is Rathi Steel & Power Ltd a good buy now?
Rathi Steel & Power Ltd is not a good buy now, based on weak price trend analysis suggesting prices may fall. However, you need to check its quality and valuation before making a decision

Performance Analysis

We have analysed the performance of the company on the following:

  • How has it performed on generating Profits?

    By checking its Revenue growth, Gross, Operating and Net Margins compared to its last 5-year median.

  • How efficiently has it utilized Capital?

    By checking its ROCE, ROA, ROE and its Cash Conversion Cycle.

  • How is it managing its Debt?

    By checking its Debt to Equity and Cash Flow from Operations.

A: What are the trends in revenue and profit margins?

Q.1 Revenue growth of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd revenue growth is 2% for FY-2025, which is below its 5-year CAGR of 68.06%, indicating slower growth.

Q.2 Gross Profit margin of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Gross profit margin which is the profit after deduction of direct costs, is 3.7% for FY-2025, which is above its 5-year median of 3.3%, indicating increasing margins.

Q.3 Operating Profit Margin of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Operating Profit Margin which is the profit after deduction of all operating costs, is 4.38% for FY-2025, which is in line with its 5-year median of 4.36% indicating stable margins.

Q.4 Net Profit Margin of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Net Profit Margin is 2.77% for FY-2025, is below its 5-year median of 4.77%, indicating decreasing margins.
Current Level 5-year
Historic Median
Gross Profit Margin (%) 3.7 3.3
Operating Profit Margin (%) 4.38 4.36
Net Profit Margin (%) 2.77 4.77

B: Does the business utilize capital efficiently?

Q.5 Return on Asset of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Return on Asset is 8.23%, which is below its 5-year historical median of 16.91%, indicating deteriorated asset utilization efficiency.

Q.6 Return on capital employed (ROCE) of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Return on capital employed is 13.16% for FY-2025, which is below its 5-year historical median of 32.24%. The current ROCE is below its estimated weighted average cost of capital (WACC) of 14%, indicating value preservation.

Q.7 Cash conversion cycle of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Cash conversion cycle is -9 days, below its 5-year historical median of -6 days, indicating improved working capital management. However, you need to compare this with its peers in the industry.

C: How much debt does the business have and is it at a sustainable level?

Q.8 Debt to Equity ratio of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Debt-to-Equity ratio is 0.29, which is lower the industry average of 0.31, indicating lower debt levels in the industry.

Q.9 Debt to cash flow from operations of Rathi Steel & Power Ltd?
Rathi Steel & Power Ltd Debt to cash flow from operations is -3.55, which is at a unhealthy level.

Ownership & governance

D: Promoter shareholding and pledge status of Rathi Steel & Power Ltd?

Q.1 Promoter shareholding and pledge status of Rathi Steel & Power Ltd?
Promoters hold 41.30% of the Rathi Steel & Power Ltd, with 0.00% of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

E: How does Rathi Steel & Power Ltd performance compare with that of its Peers?

Q.1 Revenue growth of Rathi Steel & Power Ltd vs industry peers?
Rathi Steel & Power Ltd revenue CAGR is 68.06%, compared to the industry median CAGR of 7.56%, indicating faster growth and gaining its market share.
Profit Metrics
Current Level 5-year
Industry Median
Revenue Growth (%) 2 7.6
Gross Profit Growth (%) 46.2 19.3
Operating Profit Growth (%) 4.8 13.8
Net Profit Growth (%) -41.7 24.6
Operating Efficiency
Current Level 5-year
Industry Median
Asset Turnover (x) 2.97 1.27
ROE (%) - 8.04
ROCE (%) 13.16 11.28
Cash Conversion Cycle (days) -9.26 72

Valuation & price assessment

Q.1 Stock return of Rathi Steel & Power Ltd over the last decade?
Over the last 9 year(s), the stock has delivered a CAGR of 18.7% based on the current price.
9Y 5Y 3Y 1Y
Share Price
CAGR		 18.7% 53.5% 104.4% -42.9%
Q.2 Valuation ratios of Rathi Steel & Power Ltd vs historical?
The current P/E ratio of 16.79 is higher than its historical median of 1.88, indicating that the stock is trading above its historical average valuation.
Q.3 How do the current valuation ratios compare with 5-year historical median and industry numbers?
Valuation Ratios Current 5-year
Historic Median		 5-year
Industry Median
Price to Earnings 16.79 1.88 17.36
Price to Book 1.18 -0.02 1.63
Price to Sales 0.25 0.23 0.74
EV to EBITDA 7.03 12.36 10.05

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