Sunflag Iron and Steel Company Limited

Basic Materials — Steel · NSE

₹430.90+₹7.45 (+1.76%)

DalalBaazaar Score

42 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by high debt relative to equity, small-cap size, which brings sharper price swings.

In simple words: The business is earning a fairly low return on the money invested in it, with modest growth. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:09 pm

Caution warranted. Multiple fundamental metrics — flagged in red below — point to either valuation stretch, leverage risk, or weakening profitability. This doesn't mean avoid the stock outright, but it does mean the burden of proof is on the growth story to justify the current price.

Understanding the Business

Company site ↗

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

What does this company do?

Sunflag Iron and Steel Company Limited manufactures and sells steel rolled products in India and internationally.

IndustrySteel

SectorBasic Materials

Annual revenue₹3,920 Cr

How does it make money?

Turns over ₹3,920 Cr a year. Of every ₹100 of sales, about ₹5 reaches shareholders as profit, with ₹12 left at the operating level before interest, tax and depreciation.

EBITDA margin12.0%

Net margin5.2%

Who are its competitors?

The closest listed comparisons in its industry are TATA STEEL LIMITED, JSW STEEL LIMITED, JINDAL STEEL LIMITED, STEEL AUTHORITY OF INDIA. These are the companies its valuation and returns are measured against elsewhere in this report.

TATA STEEL LIMITEDP/E 19.8x · ROE 10.8%

JSW STEEL LIMITEDP/E 12.0x · ROE 24.7%

JINDAL STEEL LIMITEDP/E 39.1x · ROE 5.3%

STEEL AUTHORITY OF INDIAP/E 16.5x · ROE 7.1%

What is its competitive advantage?Little sign of one

Returns on capital of 3.4% 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.

ROCE3.4%

ROE2.3%

Peer median ROE10.8%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +12% while net margin moved -84% 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+12%

Margin effect-84%

DalalBaazaar Score

42/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue CAGR of only 4.0% — barely ahead of inflation
✗ Profit has declined at 43.4% a year
✗ Profit is compounding slower than revenue — margins are being squeezed as the business grows

Quality vs. Valuation

Company Quality

40/ 100

Weak

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

Valuation

30/ 100

Expensive

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

Weak on business quality and not cheap enough to compensate.

Historical Valuation

Current P/E

37.7x

3Y Median

29.2x

40 monthly readings · mean 23.2x · range 2.8x–41.6x

Sector Median

18.2x

median of 4 sector peers

⚠️Current valuation is approximately 29% above its 3y median of 29.2x. 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 108% above the peer median of 18.2x.

vs. its own history

Expensive

29.2x median over 40 months · +29%

vs. sector peers

Expensive

18.2x median of 4 peers · +108%

vs. generic bands

Expensive

Above 35x

P/E (Trailing)

37.7x

P/B

0.88x

EV/EBITDA

17.3x

PEG

6.86

Dividend Yield

0.23%

What's Good / What's Bad

🟢 What's Going Well3

Debt is being paid down
Total debt is down 11% over 3 years.
Cash generation is improving
Free cash flow is up 140% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention3

Return on equity is falling
ROE has dropped from 33.4% to 2.3% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 38.1% to 3.4% — often a sign of competition or overexpansion.
Valuation above its historical average
At 37.7x the stock trades 29% above its own median of 29.2x.

Red Flags

2 items require attention · 1 high · 1 watch

🔴High leverageFinancial
Debt/Equity of 5.91x — earnings must service borrowings before shareholders see anything.
🟡Profit is decliningFinancial
Net profit is down 82% over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

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?

Leverage amplifies any setback
Debt/Equity of 5.91x. Interest is payable whether or not the business has a good year.
The price already assumes success
The stock trades 29% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
Growth barely outpaces inflation
Revenue compounding at 4.0% 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 33.4% to 2.3%. 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
Small 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 10%✓ 12.0%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Revenue growth stays above 4% a year✗ 4.0% CAGR
Latest reported year was 6.5%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
3Free cash flow remains positive✓ ₹262 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.2x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✗ 3.4%
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

3 good · 5 neutral · 3 weak

Market Cap

₹7,766 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

37.7x

Fair

Fairly valued against the generic band

P/B Ratio

0.88x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹11.42

Profitable

Profitable on a per-share basis

ROE

2.3%

Weak

Weak capital efficiency

ROCE

3.4%

Weak

Low return on total capital employed

Debt/Equity

5.91x

High

High leverage

Revenue Growth (YoY)

6.5%

Modest

Modest growth

Profit Growth (YoY)

5.5%

Modest

Slow profit growth

Dividend Yield

0.23%

Modest

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

Free Cash Flow

₹262 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

CMP

₹430.9

Operating Margin

8.3%

Average

Average margins

Net Margin

5.1%

Average

Average bottom-line conversion

Current Ratio

1.47

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

1.06

Market-like

Moves roughly in line with the market

52W Range Position

83%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

425.3 / 381.2

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

55.2

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹3,487 Cr	₹3,415 Cr	₹3,534 Cr	₹3,920 Cr	+4.0%
EBITDA	₹430 Cr	₹356 Cr	₹375 Cr	₹470 Cr	+3.0%
EBITDA Margin	12.3%	10.4%	10.6%	12.0%	—
PAT (Net Profit)	₹1,115 Cr	₹144 Cr	₹162 Cr	₹202 Cr	-43.4%
EPS	₹61.89	₹7.97	₹8.99	₹11.23	-43.4%
ROE	33.4%	2.8%	1.8%	2.3%	—
ROCE	38.1%	4.2%	2.7%	3.4%	—
Total Debt	₹609 Cr	₹727 Cr	₹645 Cr	₹545 Cr	-3.6%
Free Cash Flow	₹109 Cr	₹119 Cr	₹104 Cr	₹262 Cr	+33.8%

🟢 Revenue has grown at 4.0% a year over 3 years.

🟢 EBITDA has grown at 3.0% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 12.0% over 3 years.

🔴 PAT (Net Profit) has shrunk at 43.4% a year over 3 years.

🔴 EPS has shrunk at 43.4% a year over 3 years.

🔴 ROE has fallen from 33.4% to 2.3% over 3 years (-31.1 pts).

🔴 ROCE has fallen from 38.1% to 3.4% over 3 years (-34.6 pts).

🟢 Total Debt has shrunk at 3.6% a year over 3 years.

🟢 Free Cash Flow has grown at 33.8% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹11,292 Cr

Total Liabilities

₹2,418 Cr

Total Debt

₹545 Cr

Cash & Equivalents

₹182 Cr

Operating Cash Flow

₹390 Cr

Capex

-₹128 Cr

Shareholding (proxy)

Institutional Holding

0.5%

Insider Holding

78.4%

Corporate Actions

Dividend Rate

₹1

Ex-Dividend Date

11 Sept 2026

Peer Comparison

Company	P/E	ROE
TATA STEEL LIMITED	19.8x	10.8%
JSW STEEL LIMITED	12.0x	24.7%
JINDAL STEEL LIMITED	39.1x	5.3%
STEEL AUTHORITY OF INDIA	16.5x	7.1%

Recent News

6 general

Sunflag Iron and Steel (BSE:500404) - Stock Analysis

Simply Wall Street, 14 Oct

Sunflag Iron and Steel Company vs Nifty 50 Return Comparison

Univest, 12 Oct

Sunflag Iron & Steel sets Sep 25 for 40th AGM; book closure begins Sep 12

scanx.trade, 25 Sept

Sunflag Iron & Steel zooms 29% in 2 days, hits record high; here's why

Business Standard, 05 May

Sunflag Iron And Steel Company - Concurrent Gainers: 10 smallcap stocks that gained for 5 days in a row

The Economic Times, 26 Sept

Sunflag Iron And Steel Company Share: Bull Case vs Bear Case for 2026

Univest, 25 Sept

Watch Items

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

DalalBaazaar Thesis

🔴Business QualityWeak5.9/20

🟡Financial HealthAdequate12.6/20

🔴GrowthWeak5.7/20

🔴ProfitabilityWeak5.8/15

🟡ValuationFair7.5/15

🔴RiskHigh4.1/10

Weak on the fundamentals

Poor scores on business quality without a price low enough to compensate. There is no obvious argument for owning this over a stronger company at a similar valuation. 1 high-severity red flag sits above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 10%12.0%
✗Revenue growth stays above 4% a year4.0% CAGR
✓Free cash flow remains positive₹262 Cr
✓Debt / EBITDA stays below 2x1.2x
✗ROCE stays above 8%3.4%