40% margins, 15x PE: The ‘captive’ advantage shielding these 2 metal stocks

Two midcap companies show what this edge is worth. One owns its iron ore and manganese ore. The other owns its coal and a growing fleet of power plants. Both turn captive inputs into operating margins that a soap or biscuit maker would be proud of. And serious money has noticed. Ace investor Mukul Agrawal and Sunil Singhania’s Abakkus fund both hold the latter, while foreign funds quietly grew their stake several times over in three years in the former.

But there is a catch. Both stocks have already re-rated hard from the throwaway single-digit multiples the market once stamped on them. The question for a retail investor now is not whether these are good businesses. The question is whether what is left on the table is worth the risk. Let us dive in.

#1 Sandur Manganese: The Miner That Keeps 40 Paise of Every Operating Rupee

Incorporated in 1954, The Sandur Manganese & Iron Ores Limited is the flagship of Karnataka’s Sandur group and the third largest manganese ore miner in India. Its edge is easy to state but very hard to copy. It owns its mines.

With a market cap of Rs 10,000 cr, the company is sitting on roughly 110 million tonnes of iron ore reserves and 17 million tonnes of manganese ore in the Ballari belt, with leases running to 2033, Sandur does not buy its main raw material. It pulls it out of the ground.

That ownership shows up where it counts, on the margin line. On a standalone basis, which captures the pure mining and ferroalloy business, Sandur’s operating profit margin has run above 40% in recent quarters. A steel re-roller buying ore and power on the market would be delighted with half of that. This is what owning the input does.

When manganese and iron ore prices climb, Sandur banks the gain instead of paying it away. The integration runs deeper still as the company also makes its own coke and runs captive waste-heat power, so very little of its cost base is left to the mercy of an outside supplier.

A Growth Story That Changed Shape in 2024

Financial Year	FY22	FY23	FY24	FY25	FY26
Sales (Rs cr)	2,249	2,126	1,252	3,135	5,088
EBITDA (Rs cr)	974	392	320	782	1,209
Net Profit (Rs cr)	675	271	239	471	658

Navigating Base Effects & Realities

There is a wrinkle in these numbers, and it is worth saying plainly. Sandur began reporting consolidated accounts only from FY22, so a clean five-year consolidated record does not exist. Screener.in leaves the five-year growth rate blank for exactly that reason, and I will not add one as well.

The bigger shift came in November 2024, when Sandur completed the purchase of Arjas Steel, a specialty steel maker. That deal roughly quadrupled reported revenue, from Rs 1,252 cr in FY24 to Rs 5,088 cr in FY26. It also pulled the consolidated operating margin down to about 24%, because specialty steel earns less than raw ore. So, the headline 24% margin understates the mining engine. Read the year-by-year figures, not a single tidy rate.

A Balance Sheet That Funded Its Own Ambition

For a company that just made an acquisition, Sandur carries very little strain. Return on capital employed (ROCE) was 24% in FY26, and the debt-to-equity ratio sits near 0.31x. Borrowings did climb, from Rs 133 cr in FY24 to about Rs 999 cr in FY26, to pay for Arjas and for expansion. But the cash machine covered it. The company threw off Rs 1,143 cr from operations in FY26 and close to Rs 988 cr of free cash. Promoters hold 74.2%, which means the family running the mines has by far the most to lose if the plan stumbles.

The Price Has Already Noticed

The share price of Sandur was around Rs 36 in June 2021 and as on 25^th June 2026 it was Rs 206, which is a jump of 472% in 5 years. Rs 1 lakh put into the stock five years ago would be worth close to Rs 5.7 lakhs today.

When it comes to valuation, Sandur trades at PE of nearly 15x against the current Industry median of 18x.

The FII (Foreign Institutional Investor) holding, in very small numbers, has grown consistently from 0.3% in June 2023 to 1.7% in June 2026.

The Core Danger of the Trade

The risks are however real, not decorative. The specialty steel business that lifted revenue also dilutes the very margins that make Sandur special, and folding in Arjas is not finished. A forest clearance matter in Karnataka carries a compensatory demand of about Rs 131 cr. The stock sits in the midcap bucket, so liquidity is thin and price swings are sharp. And because profit rides on manganese and iron ore prices, a soft commodity year would show up fast.

#2 Sarda Energy: When the Smart Money Owns the Cousin

Incorporated in 1973, Sarda Energy & Minerals is the flagship of the Raipur-based Sarda group and one of India’s lower-cost integrated steel and ferroalloy producers. Its captive advantage is a different one.

With a market cap of Rs 18,359 cr, Sarda owns coal mines and, more and more, power plants. Energy now contributes roughly two-thirds of its operating profit after a steady push into thermal and hydro generation, including a recent move to take over the SKS Power assets. Put simply, Sarda has quietly turned itself from a steel maker into an integrated metals-and-energy house.

That is also why the marquee names showed up. As of March 2026, ace investor Mukul Agrawal held about 1.14% of Sarda, and Sunil Singhania’s Abakkus Emerging Opportunities Fund held roughly 1.03%. Neither stake is large, but both are the kind of deliberate position that sends retail investors looking up a ticker. Promoters own 73.2%.

Five Years of Compounding, With A Cyclical Dip in The Middle

Financial Year	FY21	FY22	FY23	FY24	FY25	FY26	5Y CAGR
Sales (Rs cr)	2,199	3,914	4,212	3,868	4,643	5,690	21%
EBITDA (Rs cr)	520	1,355	1,060	798	1,237	1,787	28%
Net Profit (Rs cr)	376	807	604	524	702	1,109	24%

Over five years, sales grew at about 21% a year, operating profit at 28%, and net profit at 24%, by Screener’s figures. But take a closer look at FY23 and FY24. Operating profit slid from Rs 1,355 cr to Rs 798 cr as steel and ferroalloy prices cooled. That is simply the nature of the business. The trend line points up, but it is not a straight line, and any reader expecting smooth, predictable growth from a commodity producer will be let down sooner than later.

Examining The Balance Sheet Burden

Sarda earns a return on capital employed of about 17% and a return on equity near 16%, with debt-to-equity around 0.36. Those are healthy figures for a metals company. The watch item is working capital, which Screener flags as working capital days have stretched from about 94 to 165 over a year, and borrowings rose to roughly Rs 2,632 cr as the company funds its power expansion.

Free cash flow was strong in FY26 at about Rs 1,400 cr, so the spending is being earned, not just borrowed. But the energy build-out carries execution risk, as a transmission tower collapse that briefly shut its Sikkim hydro plant reminded everyone.

Cheaper Than Hot Steel Peers, Dearer Than Its Own History

The share price of Sarda Energy & Minerals Ltd was about Rs 12 in July 2021 and as on 25^th June 2026 it was Rs 521, which is a 4,241% jump in 5 years. Rs 1 lakh invested in the stock 5 years ago would have been Rs 43.4 lakhs today.

Regarding valuations, Sarda trades at a PE of 17x against the current industry median of 18x. Sarda sits squarely in the middle of the ferrous-metals pack, neither the cheapest nor the priciest name on the board. And against its own record it is not cheap at all. Sarda’s 10-year median PE was close to 10x. The stock has re-rated from a deep-value commodity name to a fairly valued integrated producer.

The Risks Worth Pricing In

Sarda’s swing factor is the same as Sandur’s, commodity prices. A weak steel or ferroalloy cycle compresses margins quickly. The pivot to energy lowers that dependence over time, but in the near term it raises capital intensity and execution risk. Rising debt and stretched working capital deserve a close watch. And the easy valuation gains, the move from single-digit to mid-teen multiples, are behind this stock, not ahead of it.

Is Owning the Mine Still a Good Trade?

Companies that control their raw material keep margins that price-takers can only envy, and both Sandur and Sarda prove it. Sandur literally owns its ore. Sarda owns its coal and its power. That is a structural edge, not a one-year fluke, and it is the reason both throw off so much cash.

But the market is wide awake. The chapter where these stocks were quietly, obviously cheap is finished. Both now trade at more than their 10-year median multiples, and both sit mid-pack against peers rather than in the bargain bin. What an investor is buying today is not a mispriced secret. It is a pair of well-run, owner-operated businesses whose margins should hold through a normal cycle, bought after a strong run.

That changes the question entirely. It is no longer “why is this so cheap.” It is “can these margins last, and am I happy paying a fair price for a cyclical business at this point in the cycle.” For some, the captive moat and the heavy promoter skin in the game will be reason enough to keep watching closely. For others, the smarter move may be patience and a watchlist. Either way, the way to own a metal cycle is to own the part of it that never has to buy at market. These two do exactly that.

Disclaimer:

Note: We have relied on data from http://www.Screener.in and http://www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein.