Sterling Tools Limited

Industrials — Tools & Accessories · NSE

₹221.98+₹0.47 (+0.21%)

DalalBaazaar Score

48 / 100

🟡 Moderate

Verdict

NEUTRAL

Risk

Low

Driven by micro-cap size, which brings thin liquidity, falling profits.

In simple words: The business is earning a fairly low return on the money invested in it, though profits are falling even as sales grow. The direction of profits is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:08 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

Company site ↗

The 60-second version of Sterling Tools Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Sterling Tools Limited manufactures and sells high tensile cold forged fasteners to original equipment manufacturers in India.

IndustryTools & Accessories

SectorIndustrials

Annual revenue₹811 Cr

How does it make money?

Turns over ₹811 Cr a year. Of every ₹100 of sales, about ₹4 reaches shareholders as profit, with ₹11 left at the operating level before interest, tax and depreciation.

EBITDA margin10.8%

Net margin3.6%

Who are its competitors?

The closest listed comparisons in its industry are LARSEN & TOUBRO LTD., SIEMENS LTD, ABB INDIA LIMITED. These are the companies its valuation and returns are measured against elsewhere in this report.

LARSEN & TOUBRO LTD.P/E 30.1x · ROE 15.2%

SIEMENS LTDP/E 88.8x · ROE 10.5%

ABB INDIA LIMITEDP/E 92.6x · ROE 19.1%

What is its competitive advantage?Little sign of one

Returns on capital of 9.7% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

ROCE9.7%

ROE5.6%

Peer median ROE15.2%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +6% while net margin moved -42% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+6%

Margin effect-42%

DalalBaazaar Score

48/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue CAGR of only 2.1% — barely ahead of inflation
✗ Profit has declined at 15.1% a year
✗ Profit fell 35.2% in the latest year

Quality vs. Valuation

Company Quality

45/ 100

Average

How good the business is, ignoring the share price entirely.

Valuation

67/ 100

Fair

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

30.9x

3Y Median

26.0x

40 monthly readings · mean 24.3x · range 10.0x–45.3x

Sector Median

88.8x

median of 3 sector peers

⚠️Current valuation is approximately 19% above its 3y median of 26.0x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

🟢Against its sector it trades 65% below the peer median of 88.8x.

vs. its own history

Fair

26.0x median over 40 months · +19%

vs. sector peers

Cheap

88.8x median of 3 peers · -65%

vs. generic bands

Fair

15x–35x

P/E (Trailing)

30.9x

P/B

1.52x

EV/EBITDA

10.3x

PEG

—

Dividend Yield

1.24%

What's Good / What's Bad

🟢 What's Going Well2

Very low debt
Debt/Equity of 0.28x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention3

Margins are compressing
EBITDA margin has slipped from 13.0% to 10.8% over 3 years.
Return on equity is falling
ROE has dropped from 12.0% to 5.6% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 15.2% to 9.7% — often a sign of competition or overexpansion.

Red Flags

3 items require attention · 3 watch

🟡Interest coverage is deterioratingFinancial
Cover has fallen from 8.8x to 5.9x.
🟡Profit is decliningFinancial
Net profit is down 39% over 3 years.
🟡Margins are compressingFinancial
EBITDA margin is down 2.2 points over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Cheaper than its peers
It trades 65% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Self-funding with balance-sheet headroom
Positive free cash flow of ₹1 Cr alongside low debt means growth, buybacks or dividends need no outside money — and a downturn can be absorbed rather than refinanced.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Margins are being competed away
EBITDA margin has fallen from 13.0% to 10.8%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Growth barely outpaces inflation
Revenue compounding at 2.1% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
Returns on shareholder capital are falling
ROE has dropped from 12.0% to 5.6%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 9%✓ 10.8%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Revenue growth stays above 4% a year✗ 2.1% CAGR
Latest reported year was 11.4%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
3Free cash flow remains positive✓ ₹1 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.7x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✓ 9.7%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

7 / 11 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✓ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✗ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 5 neutral · 2 weak

Market Cap

₹807 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

30.9x

Fair

Fairly valued against the generic band

P/B Ratio

1.52x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹7.18

Profitable

Profitable on a per-share basis

ROE

5.6%

Weak

Weak capital efficiency

ROCE

9.7%

Moderate

Moderate return on the capital in the business

Debt/Equity

0.28x

Low

Conservative leverage

Revenue Growth (YoY)

11.4%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-35.2%

Falling

Profits are shrinking

Dividend Yield

1.24%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

₹1 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

CMP

₹221.98

Operating Margin

5.9%

Average

Average margins

Net Margin

3.1%

Average

Average bottom-line conversion

Current Ratio

1.97

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.62

Defensive

Steadier than the market

52W Range Position

40%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

222.6 / 222.1

Bullish alignment (short > long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

34.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹763 Cr	₹923 Cr	₹1,024 Cr	₹811 Cr	+2.1%
EBITDA	₹99 Cr	₹114 Cr	₹118 Cr	₹88 Cr	-4.0%
EBITDA Margin	13.0%	12.3%	11.5%	10.8%	—
PAT (Net Profit)	₹48 Cr	₹55 Cr	₹58 Cr	₹29 Cr	-15.1%
EPS	₹13.29	₹15.35	₹16.05	₹8.02	-15.5%
ROE	12.0%	12.4%	11.7%	5.6%	—
ROCE	15.2%	15.9%	14.7%	9.7%	—
Total Debt	₹133 Cr	₹118 Cr	₹155 Cr	₹147 Cr	+3.4%
Free Cash Flow	₹30 Cr	₹72 Cr	₹48 Cr	₹1 Cr	-64.5%

🟢 Revenue has grown at 2.1% a year over 3 years.

🔴 EBITDA has shrunk at 4.0% a year over 3 years.

🔴 EBITDA Margin has fallen from 13.0% to 10.8% over 3 years (-2.2 pts).

🔴 PAT (Net Profit) has shrunk at 15.1% a year over 3 years.

🔴 EPS has shrunk at 15.5% a year over 3 years.

🔴 ROE has fallen from 12.0% to 5.6% over 3 years (-6.4 pts).

🔴 ROCE has fallen from 15.2% to 9.7% over 3 years (-5.5 pts).

🔴 Total Debt has grown at 3.4% a year over 3 years.

🔴 Free Cash Flow has shrunk at 64.5% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹821 Cr

Total Liabilities

₹295 Cr

Total Debt

₹147 Cr

Cash & Equivalents

₹48 Cr

Operating Cash Flow

₹56 Cr

Capex

-₹55 Cr

Shareholding (proxy)

Institutional Holding

0.1%

Insider Holding

74.9%

Corporate Actions

Dividend Rate

₹2.75

Ex-Dividend Date

28 Aug 2026

Peer Comparison

Company	P/E	ROE
LARSEN & TOUBRO LTD.	30.1x	15.2%
SIEMENS LTD	88.8x	10.5%
ABB INDIA LIMITED	92.6x	19.1%

Recent News

1 positive5 general

Sterling Tools Ltd is Rated Strong Sell

MarketsMojo, 18 Oct

Sterling Tools Ltd. Upper Circuit Today: Price, Data and Peers

Univest, 24 Sept

Sterling Tools Limited Actuals & Estimates (NSE:STERTOOLS)

TradingView, 26 Jun

Sterling Tools Ltd. Peer Comparison – Compare with Others

Value Research, 30 Aug

Sterling Tools Standalone June 2026 Net Sales at Rs 199.40 crore, up 23.77% Y-o-Y

Moneycontrol.com, 10 Aug

Sterling Tools Q1FY27: Net profit surges 48% on strong fastener demand

scanx.trade, 30 JulResults

🟢Potentially positiveReported improvement. Check whether it came from volume, price or a one-off item before treating it as a trend.

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🔴Business QualityWeak5.9/20

🟢Financial HealthStrong17.8/20

🔴GrowthWeak5/20

🔴ProfitabilityWeak4.6/15

🟡ValuationFair8.1/15

🟡RiskModerate6.2/10

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you.

This thesis breaks if

✓EBITDA margin holds above 9%10.8%
✗Revenue growth stays above 4% a year2.1% CAGR
✓Free cash flow remains positive₹1 Cr
✓Debt / EBITDA stays below 2x1.7x
✓ROCE stays above 8%9.7%