At a Glance

Suraj Products Ltd (SPL) is that small-cap steelmaker you probably ignored while staring at Tata Steel charts. Q1 FY26 saw Revenue ₹80.7 Cr (-13% YoY) and PAT ₹4.6 Cr (-32% YoY). Margins shrank to a wafer-thin 9% OPM as costs bit hard. ROCE is still decent at 17.5%, debt has been cut to ₹21 Cr, and promoters hold a chunky 73.7%. But with the stock down 56% in 1 year, the market clearly doesn’t think this sponge is soaking profits right now.

Introduction

Think of Suraj Products as the middle-class cousin of big steel names. It makes sponge iron, billets, TMT bars, and even dabbles in power. Good products, but small scale. The stock was a multibagger darling once, but FY25 and Q1 FY26 have brought it back to reality faster than iron cools in a blast furnace.

Business Model (WTF Do They Even Do?)

• Products: Sponge Iron → Pig Iron → Ingots/Billets → TMT Bars.
• Also: Captive power generation to cut costs.
• Market: Semi-urban & rural demand, cyclical with construction activity.
• Revenue Mix: Heavily skewed to commodity steel products, making it vulnerable to price swings.

Conclusion? A secondary steel player grinding its way through a tough cycle.

Financials Overview

Q1 FY26 Numbers:

• Revenue ₹80.7 Cr (vs ₹92.6 Cr YoY)
• EBITDA ₹7.3 Cr (margin 9%)
• PAT ₹4.6 Cr (vs ₹6.7 Cr YoY)
• EPS ₹4.03 (vs ₹5.89 YoY)

FY25 Recap:

• Revenue ₹326 Cr (↓5% YoY)
• PAT ₹21 Cr (↓28% YoY)
• EPS ₹18.8
• ROE 15.3% | ROCE 17.5%

Verdict: Cost pressures and lower realizations are hammering profits.

Valuation – Hot Steel or Cold Scrap?

1. P/E Multiple
   • CMP ₹279 | EPS ₹18.8 → P/E ≈ 15×
2. EV/EBITDA
   • EBITDA FY25 ₹37 Cr | EV ≈ ₹319 Cr
   • EV/EBITDA ≈ 8.6×
3. P/BV
   • BV ₹131 | P/BV ≈ 2.1×

🎯 Fair Value Range: ₹240–₹300. CMP ₹279 sits at upper band.

What’s Cooking – News, Triggers, Drama

• Land Acquisition in Abu Dhabi (Jul 2025) – 60,910 sqm on 50-year lease; new project cooking.
• Debt Reduced – down to ₹21 Cr from ₹54 Cr in FY23.
• Steel Price Volatility – a double-edged sword.
• Demand Outlook – rural construction uptick may help in H2.

Balance Sheet – Auditor’s Roast

Commentary: Debt almost gone. Assets flat. Balance sheet clean, but growth missing.

Cash Flow – Sab Number Game Hai

Commentary: Solid cash generation, but financing outflows indicate repayments are eating cash.

Ratios – Sexy or Stressy?

Commentary: Low leverage is good. Profitability decent but trending down.

P&L Breakdown – Show Me the Money

Commentary: Revenue stagnates, margins squeezed.

Peer Comparison

Commentary: Valuation reasonable vs peers, but scale disadvantage is obvious.

Miscellaneous – Shareholding, Promoters

• Promoters: 73.7% (stable)
• Public: 26.3%
• DIIs/FIIs: negligible
• Corporate Actions: Small dividends (~0.72% yield), no major buybacks.

EduInvesting Verdict™

Suraj Products is a classic case of a small-cap steel player caught between strong fundamentals and weak demand cycles. It deleveraged impressively and maintains healthy margins, but earnings are shrinking due to lower volumes and prices.

Strengths:

• Debt almost gone, healthy ROE/ROCE.
• Low-cost operations, rural demand base.
• Land acquisition hints at expansion.

Weaknesses:

• Revenue contraction, declining margins.
• Small scale, low pricing power.

Opportunities:

• Abu Dhabi project could unlock new growth.
• Steel price rebound can revive profits.

Threats:

• Commodity cycle downturn.
• Any delay in capex execution.

Final Take:

At ₹279, this is neither a deep value play nor a high-growth story. It’s a hold for patient investors who believe in management’s expansion bets. Traders? Wait for better entry.

Written by EduInvesting Team | 30 July 2025
SEO Tags: Suraj Products, Sponge Iron Stocks, Q1 FY26 Results, Smallcap Steel