Rathi Steel (504903)

FairStock Score: 49/100 — MIXED

Score breakdown: P/E: 1/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Sales growth of 53.23% and profit growth of 260.38% show strong recent operational momentum.
• Piotroski F-Score of 7/9 suggests improving fundamentals and earnings quality at the margin.
• P/E of 20.54 with reported PEG of 0.13 looks optically cheap if the high growth continues.
• Latest quarter sales of ₹160 Cr indicate a decent revenue base.

Concerns

• Latest quarterly net profit of ₹2 Cr on ₹160 Cr sales is roughly a 1.25% net margin—extremely thin for a steel company.
• ROE of 6.95% and ROCE of 9.90% are weak for the 4.54 P/B paid; book value per share is only ₹16.88.
• Stock at ₹76.66 is at the top of the 52-week range (₹13.50–₹76.66); much optimism is already priced in.
• No dividend and no disclosed Debt/Equity data limit income support and balance sheet visibility.

AI Analysis

I start the way Graham taught: what am I actually buying? Rathi Steel makes iron and steel products—commodities where the company is a price taker, not a price maker. That immediately dents any moat. The headline numbers are tempting: sales up 53.23%, profit up 260.38%. But the latest quarter shows sales of ₹160 Cr and net profit of only ₹2 Cr—about a 1.25% margin. That is razor-thin and tells me earnings can vanish when steel prices soften. The market has already raced ahead: the stock is at ₹76.66, near the top of its ₹13.50–₹76.66 range, with a market cap of ₹652 Cr. Book value is ₹16.88, so I am paying 4.54 times book for a business earning only 6.95% on equity. For a commodity steel company, that is not a margin of safety. ROCE of 9.90% is moderate but hardly exceptional in a cyclical upturn. The reported P/E of 20.54 does not look expensive if the 260% profit growth continues annually, but that is an unreliable assumption. The PEG of 0.13 is a mathematical artifact of an extraordinary one-year profit jump; it assumes the jump repeats. The Piotroski score of 7/9 gives some comfort on recent fundamentals, but I would rather own a mediocre business at a fair price than a cyclical at a peak. With no dividend and no disclosed debt-to-equity, the investor is dependent on promoter discipline and commodity luck. FairStock’s 49/100 mixed score seems right. In Buffett’s words, be fearful when others are greedy. The greed is visible; the moat is not. I would wait for a fall in price or proof of durable margins.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer