The stock has reacted negatively to persistent operational headwinds, declining 3.26% to ₹262.70 on November 12, 2025, and now trades 41.17% below its 52-week high of ₹446.55. The shares have underperformed both the broader market and the agricultural products sector significantly over the past year, with a negative return of 24.73% compared to the Sensex's 7.34% gain.
The quarter's performance marks a concerning continuation of the downward trend that began in the latter half of FY2025. Revenue declined to ₹272.95 crores, the lowest quarterly figure in the past seven quarters, reflecting both volume pressures and subdued pricing in the basmati rice export market. Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) contracted to ₹24.25 crores, down 17.60% quarter-on-quarter and 32.76% year-on-year.
Financial Performance: Declining Momentum Across Key Metrics
The quarter-on-quarter comparison reveals a troubling trend across all major financial parameters. Net sales fell 11.17% from ₹307.27 crores in Q1 FY26 to ₹272.95 crores in Q2 FY26, whilst the year-on-year decline of 26.12% from ₹369.43 crores in Q2 FY25 underscores the severity of the revenue headwinds facing the company. This marks the fourth consecutive quarter of declining sales, with the company yet to recover from the peak of ₹395.30 crores achieved in Q4 FY25.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 272.95 | ▼ 11.17% | 18.93 | ▼ 12.52% | 8.88% | 6.94% |
| Jun'25 | 307.27 | ▼ 16.43% | 21.64 | ▼ 11.85% | 9.58% | 7.04% |
| Mar'25 | 367.69 | ▼ 6.98% | 24.55 | ▼ 15.38% | 9.08% | 6.68% |
| Dec'24 | 395.30 | ▲ 7.00% | 29.01 | ▲ 8.66% | 9.99% | 7.34% |
| Sep'24 | 369.43 | ▲ 1.82% | 26.70 | ▲ 18.04% | 9.76% | 7.23% |
| Jun'24 | 362.84 | ▼ 5.39% | 22.62 | ▼ 2.71% | 8.86% | 6.23% |
| Mar'24 | 383.53 | — | 23.25 | — | 9.28% | 6.06% |
Profitability margins have compressed across the board. The operating margin (excluding other income) deteriorated to 8.88% in Q2 FY26 from 9.58% in Q1 FY26 and 9.76% in Q2 FY25. This 88 basis points year-on-year contraction reflects the twin pressures of lower realisation and rising input costs in the basmati rice value chain. The PAT margin similarly declined to 6.94% from 7.04% in the previous quarter and 7.23% in the year-ago period.
On a half-yearly basis for H1 FY2026, the company reported net sales of ₹580.22 crores, down 20.62% from ₹732.27 crores in H1 FY2025. Net profit for the first half stood at ₹40.57 crores, representing a 17.76% decline from ₹49.32 crores in the corresponding period last year. This deterioration in half-yearly performance underscores the structural challenges facing the business rather than merely seasonal fluctuations.
Operational Challenges: Revenue Decline Outpaces Cost Management
The company's operational performance has been hampered by several factors. Employee costs rose to ₹7.51 crores in Q2 FY26 from ₹4.80 crores in Q1 FY26, a 56.46% quarter-on-quarter increase that further pressured margins. Interest costs remained relatively stable at ₹1.88 crores, marginally higher than ₹1.86 crores in the previous quarter, suggesting that the company has maintained disciplined financial leverage despite challenging operating conditions.
The company's return on equity (ROE) for H1 FY2026 declined to 16.26%, marking the lowest level in recent periods and reflecting the impact of declining profitability on shareholder returns. This represents a notable deterioration from the company's five-year average ROE of 17.78%, which itself demonstrates reasonable capital efficiency. The return on capital employed (ROCE) for the half-year similarly compressed, though the company's five-year average ROCE of 25.76% remains strong, indicating historically efficient capital deployment.
Margin Pressure Alert
Operating margins have declined for three consecutive quarters, falling from 9.99% in Q4 FY25 to 8.88% in Q2 FY26. The compression of 111 basis points over two quarters signals intensifying competitive pressures in the basmati rice export market and potential pricing challenges. Employee cost escalation in Q2 FY26 further exacerbated profitability concerns.
The balance sheet reveals a company with moderate leverage and reasonable financial health. As of March 2025, shareholder funds stood at ₹733.27 crores, with long-term debt of ₹62.06 crores, resulting in a debt-to-equity ratio of 0.09 – amongst the lowest in the peer group. Current assets of ₹805.41 crores adequately cover current liabilities of ₹171.48 crores, providing a comfortable current ratio and suggesting no immediate liquidity concerns. Fixed assets have grown steadily to ₹155.93 crores, reflecting ongoing capital expenditure to enhance processing capacity.
Industry Context: Navigating Basmati Rice Export Headwinds
The basmati rice export industry has faced significant headwinds over the past year, with pricing pressures and volume challenges affecting most players in the sector. Global demand patterns have shifted, with key export markets showing subdued appetite amid economic uncertainties. Domestic supply dynamics have also played a role, with procurement costs remaining elevated whilst realisation in international markets has softened.
Chamanlal Setia Exports operates in a competitive landscape dominated by larger players with greater scale advantages. The company's market capitalisation of ₹1,286 crores positions it as the sixth-largest player amongst its peer group in the agricultural products sector. Whilst the company has historically maintained reasonable market share in premium basmati rice exports, the current challenging environment has exposed the vulnerabilities of smaller operators with limited pricing power.
Debtors Turnover Improvement
One bright spot in the operational metrics has been the improvement in working capital efficiency. The debtors turnover ratio for H1 FY2026 reached 8.33 times, the highest level in recent periods, indicating faster collection cycles and improved cash conversion. This suggests better working capital management despite the challenging revenue environment.
The sector's valuation multiples have diverged significantly, with some companies trading at premium valuations due to strong brand positioning and diversified product portfolios, whilst others like Chamanlal Setia trade at more modest multiples. The company's price-to-earnings ratio of 13.24x compares favourably to the industry average of 38x, suggesting either undervaluation or market concerns about growth sustainability.
Peer Comparison: Attractive Valuation but Weak Momentum
Relative to its peers in the agricultural products sector, Chamanlal Setia Exports presents a mixed picture. The company's valuation metrics appear attractive on the surface, but operational performance lags behind several competitors.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE % | Dividend Yield | Debt to Equity |
|---|---|---|---|---|---|
| Chamanlal Setia | 13.24 | 1.84 | 17.78% | 0.92% | 0.09 |
| KRBL Ltd. | 16.01 | 1.65 | 12.54% | 0.93% | -0.08 |
| Kaveri Seed Co. | 16.51 | 2.79 | 17.41% | 0.56% | -0.24 |
| Gujarat Ambuja Exp | 23.81 | 1.64 | 15.44% | 0.23% | -0.18 |
| GRM Overseas | 43.71 | 6.40 | 26.09% | — | 0.73 |
| Sanstar Ltd. | 61.89 | 2.53 | 6.64% | — | -0.28 |
Chamanlal Setia trades at the lowest P/E multiple of 13.24x amongst its peers, significantly below the peer group average of approximately 32x. This valuation discount could reflect market concerns about near-term earnings trajectory, given the company's declining revenue and profit trends. The price-to-book ratio of 1.84x is also amongst the lowest in the group, below the peer average of roughly 3.0x.
On profitability metrics, Chamanlal Setia's five-year average ROE of 17.78% positions it favourably, ranking second amongst the peer group and ahead of larger players like KRBL (12.54%) and Gujarat Ambuja Exports (15.44%). However, the recent deterioration in ROE to 16.26% for H1 FY2026 suggests this historical advantage may be eroding. The company's debt-to-equity ratio of 0.09 is amongst the best in the sector, indicating conservative financial management and significant debt capacity if needed.
Valuation Analysis: Discount Justified by Deteriorating Fundamentals
At the current market price of ₹262.70, Chamanlal Setia Exports trades at a significant discount to its historical valuations and peer group multiples. The stock has declined 41.17% from its 52-week high of ₹446.55 achieved earlier in the year, reflecting growing investor concerns about the company's earnings trajectory.
The company's enterprise value-to-EBITDA multiple of 10.22x appears reasonable in absolute terms, though it must be considered in the context of declining EBITDA generation over recent quarters. The EV-to-sales ratio of 0.98x suggests the market is pricing in limited revenue growth expectations, a prudent stance given the 26.12% year-on-year revenue decline in Q2 FY26.
The valuation has been downgraded multiple times over the past six months, moving from "Expensive" in May 2025 to "Very Attractive" as of September 2025. This progression reflects both the share price decline and deteriorating fundamentals. Whilst the current valuation appears optically cheap, investors must weigh whether this discount adequately compensates for the execution risks and challenging operating environment.
"The 65% valuation discount to industry P/E reflects market scepticism about earnings sustainability rather than a compelling opportunity, given four consecutive quarters of declining revenue."
Shareholding Pattern: Stable Promoter Base, Modest Institutional Interest
The shareholding structure of Chamanlal Setia Exports reveals a promoter-dominated company with limited institutional participation. Promoter holding has remained stable at 74.05% over the past five quarters, indicating strong management commitment and alignment with minority shareholders. The promoter group, led by Rajeev Setia (36.62%) and Vijay Kumar Setia (35.33%), has maintained its stake without any pledging, a positive signal for corporate governance.
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 74.05% | 74.05% | 74.05% | — |
| FII | 2.81% | 2.44% | 2.01% | +0.37% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | — |
| Insurance | 0.00% | 0.00% | 0.00% | — |
| Other DII | 1.97% | 2.72% | 2.62% | -0.75% |
| Non-Institutional | 21.17% | 20.80% | 21.32% | +0.37% |
Foreign institutional investor (FII) holdings have gradually increased from 2.01% in March 2025 to 2.81% in September 2025, suggesting some international interest despite the challenging operating performance. However, the absolute level of FII participation remains modest, with only 10 foreign institutional investors holding stakes. The complete absence of mutual fund and insurance company holdings is noteworthy, indicating limited interest from domestic institutional investors.
Other domestic institutional investor (DII) holdings declined from 2.72% in June 2025 to 1.97% in September 2025, a 75 basis points reduction that may signal waning confidence amongst this investor category. Non-institutional holdings, representing primarily retail and high-net-worth individuals, have remained relatively stable around 21%, suggesting a loyal retail shareholder base.
Stock Performance: Significant Underperformance Across Timeframes
The stock's performance over the past year has been disappointing across virtually all timeframes, with significant underperformance relative to both the broader market and the agricultural products sector. Over the past year, Chamanlal Setia Exports has declined 24.73%, compared to the Sensex's gain of 7.34%, resulting in negative alpha of 32.07 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.40% | +1.18% | -4.58% |
| 1 Month | +2.36% | +2.36% | 0.00% |
| 3 Months | -9.26% | +5.25% | -14.51% |
| 6 Months | -17.71% | +2.45% | -20.16% |
| Year-to-Date | -38.70% | +8.07% | -46.77% |
| 1 Year | -24.73% | +7.34% | -32.07% |
| 2 Years | +24.27% | +29.40% | -5.13% |
| 3 Years | +133.93% | +36.66% | +97.27% |
The year-to-date performance has been particularly weak, with the stock declining 38.70% compared to the Sensex's 8.07% gain, resulting in a staggering 46.77 percentage points of underperformance. This sharp decline reflects both the deteriorating fundamentals and broader investor risk-aversion towards small-cap stocks in the agricultural sector.
Compared to the agricultural products sector, which has delivered a 23.64% return over the past year, Chamanlal Setia has underperformed by 48.37 percentage points. This sector underperformance suggests company-specific challenges beyond broader industry headwinds. The stock's beta of 1.35 indicates higher volatility than the market, with volatility of 42.69% over the past year classifying it as a high-risk investment.
Technical indicators paint a bearish picture, with the stock trading below all key moving averages – the 5-day (₹270.87), 20-day (₹271.03), 50-day (₹273.59), 100-day (₹299.26), and 200-day (₹310.09) moving averages. The overall technical trend is classified as "Mildly Bearish," having deteriorated from "Bearish" on November 7, 2025. Multiple technical indicators including Bollinger Bands and moving averages signal bearish momentum, whilst the MACD shows mixed signals across weekly and monthly timeframes.
Investment Thesis: Quality Concerns Outweigh Valuation Appeal
The investment case for Chamanlal Setia Exports presents a challenging risk-reward profile. Whilst the company trades at attractive valuation multiples relative to peers and historical norms, the deteriorating operational performance and negative financial trends raise serious concerns about earnings sustainability.
The company's quality grade of "Average" reflects moderate long-term financial performance, with five-year sales growth of 11.52% and EBIT growth of 7.79%. Whilst these growth rates are respectable, they fall short of the more robust expansion achieved by some peers. The strong average ROCE of 25.76% and ROE of 17.78% demonstrate historically efficient capital deployment, but the recent deterioration in these metrics to 16.26% (ROE for H1 FY2026) signals eroding competitive advantages.
The financial trend classification of "Negative" is based on multiple concerning factors: quarterly PAT has fallen 25.7% versus the previous four-quarter average, net sales in Q2 FY26 hit the lowest level in seven quarters, operating profit margin declined to 8.88%, and earnings per share compressed to ₹3.81. These deteriorating fundamentals suggest the company is facing structural challenges rather than temporary headwinds.
Key Strengths and Risk Factors
Key Strengths
- Strong historical ROE of 17.78% and ROCE of 25.76%, demonstrating efficient capital allocation over the long term
- Conservative balance sheet with debt-to-equity ratio of 0.09, amongst the lowest in the peer group, providing financial flexibility
- Zero promoter pledging with stable 74.05% promoter holding, indicating strong management commitment and confidence
- Attractive valuation at P/E of 13.24x, trading at 65% discount to industry average of 38x
- Improved working capital efficiency with debtors turnover ratio reaching 8.33 times in H1 FY2026, the highest in recent periods
- Established presence in premium basmati rice exports with decades of operating history since 1974
- Adequate liquidity with current assets of ₹805.41 crores covering current liabilities of ₹171.48 crores comfortably
Key Concerns
- Four consecutive quarters of declining revenue, with Q2 FY26 sales falling 26.12% year-on-year to ₹272.95 crores
- Operating margin compression of 88 basis points year-on-year to 8.88%, indicating pricing pressures and rising costs
- Net profit decline of 29.08% year-on-year in Q2 FY26, with PAT falling to ₹18.93 crores from ₹26.70 crores
- Deteriorating ROE to 16.26% in H1 FY2026, the lowest level in recent periods, signalling eroding profitability
- Significant stock underperformance of 48.37 percentage points versus the agricultural products sector over the past year
- Complete absence of mutual fund and insurance holdings, indicating limited institutional confidence
- High volatility of 42.69% with beta of 1.35, classifying the stock as high-risk with bearish technical indicators
- Modest 11.52% five-year sales CAGR and 7.79% EBIT CAGR, lagging more dynamic competitors
Outlook: What to Watch
Positive Catalysts
- Stabilisation of basmati rice export prices and recovery in international demand from key markets
- Successful margin expansion initiatives to reverse the 88 basis points year-on-year operating margin decline
- Revenue growth resumption with quarterly sales crossing ₹350 crores sustainably
- Return on equity improvement back above 18% through enhanced operational efficiency
- Increased institutional investor participation, particularly from mutual funds currently at 0%
Red Flags
- Further revenue decline below ₹270 crores in Q3 FY26, extending the downward trend to five consecutive quarters
- Operating margins falling below 8.5%, indicating inability to manage costs amid pricing pressures
- Continued decline in other DII holdings following the 75 basis points reduction in Q2 FY26
- Stock breaking below ₹241.65 support (52-week low), potentially triggering further technical weakness
- Return on equity deteriorating below 15%, signalling structural profitability challenges
The company faces a critical juncture in Q3 FY26, where it must demonstrate operational stabilisation to arrest the declining trajectory. Key monitoring points include revenue trends, margin recovery initiatives, working capital management, and any strategic initiatives to enhance competitiveness. The management's ability to navigate the challenging export environment whilst protecting profitability will be crucial for investor confidence.
The Verdict: Attractive Valuation Insufficient to Offset Execution Risks
Score: 37/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst the valuation appears attractive at 13.24x P/E, the deteriorating fundamentals with four consecutive quarters of revenue decline, margin compression, and negative financial trends present significant downside risks. The stock's classification as "high risk, low return" with 42.69% volatility and bearish technical indicators suggests potential for further weakness. Wait for concrete evidence of operational stabilisation, including revenue growth resumption and margin recovery, before considering entry.
For Existing Holders: Consider reducing positions or exiting on any technical bounce towards ₹280-290 levels. The negative financial trend classification, declining institutional interest (DII holdings fell 75 bps in Q2), and persistent operational headwinds suggest limited near-term upside. The complete absence of mutual fund holdings and bearish technical setup indicate institutional scepticism. Only long-term investors with high risk tolerance and conviction in eventual turnaround should maintain holdings, closely monitoring Q3 FY26 results for signs of stabilisation.
Fair Value Estimate: ₹240-250 (8% downside from current levels), based on normalised earnings of ₹18-19 crores quarterly and a 13-14x P/E multiple reflecting the challenging operating environment and execution risks. Upside potential exists only if the company demonstrates sustained revenue growth recovery and margin expansion.
The 65% valuation discount to industry multiples reflects justified concerns about earnings sustainability rather than a compelling opportunity. Near-term catalysts remain elusive, with the balance of risks tilted to the downside until operational metrics stabilise.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The views expressed are based on publicly available information and analysis as of the date of publication and may change without notice.
