Sarda Energy (SARDAEN)

FairStock Score: 56/100 — STEADY

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

Key Financials

Strengths

• Promoter holding of 73.16% aligns interests and signals long-term commitment
• ROE of 16.8% and ROCE of 15.27% indicate efficient capital allocation
• Debt-to-equity of 0.38 provides balance sheet cushion in a cyclical sector
• Sales growth of 32.2%, profit growth of 53.99%, and 5-year revenue CAGR of 16.12% show strong momentum
• PEG of 0.57 suggests growth is relatively inexpensive if earnings are sustainable

Concerns

• Graham Number of ₹346.44 versus price of ₹586.60 implies a negative margin of safety around -59%
• EV/EBITDA of 119.40 is extremely stretched and leaves little room for error
• Free cash flow of ₹-1,246 Cr is negative despite reported profits, questioning earnings quality
• Iron and steel is inherently cyclical; current high growth could reverse sharply

AI Analysis

Looking at Sarda Energy, I am immediately reminded that in steel, price is truth. The company has delivered 32.2% sales growth and 53.99% profit growth, with ROE of 16.8% and ROCE of 15.27%. Those are high-quality numbers, and a debt-to-equity ratio of only 0.38 gives me comfort. Promoter holding at 73.16% aligns interests with minority shareholders. But I cannot ignore valuation. The Graham Number is ₹346.44, while the market offers me the share at ₹586.60 — that gives me no margin of safety. In fact, the negative margin of safety is nearly 59%. At a P/E of 18.53 and P/B of 3.29, I am paying top rupee for cyclical earnings. The EV/EBITDA of 119.40 is extreme and tells me the market has already priced in perfection. Free cash flow is negative at ₹-1,246 Cr, which bothers me; earnings are not converting into cash. The Piotroski score of 6 is okay, not pristine, and the Altman Z-score of 2.88 sits in the grey zone, though debt is manageable. This is a well-run steel business, but steel is cyclical. I would call it a Cyclical, not a permanent grower. The 5-year revenue CAGR of 16.12% and low PEG of 0.57 are attractive only if the current upcycle persists. As Graham said, buying a wonderful business at a fair price is fine, but here I question whether the price is fair. I would wait for a better margin of safety, or clearer proof that cash flow turns strongly positive.

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