With a market capitalisation of ₹11,075 crores, the Vadodara-based company has demonstrated remarkable consistency in margin expansion and revenue growth, cementing its position as a high-growth player in the industrial plastics segment. The quarter's performance marks the continuation of an outstanding financial trend, with the company achieving record-breaking metrics across multiple parameters.
Financial Performance: Exceptional Margin Expansion Drives Profitability
Shaily Engineering Plastics demonstrated robust operational excellence in Q2 FY26, with net sales reaching ₹256.65 crores, representing a sequential growth of 4.04% from ₹246.69 crores in Q1 FY26 and a substantial year-on-year expansion of 33.67% from ₹192.00 crores in Q2 FY25. This consistent revenue trajectory reflects the company's deepening penetration in its core markets and successful execution of capacity expansion initiatives undertaken in recent years.
The standout feature of the quarter was the remarkable margin expansion across all profitability metrics. Operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) surged to ₹79.33 crores, yielding an impressive operating margin of 30.91%—a substantial improvement of 994 basis points compared to 20.97% in Q2 FY25. This margin expansion trajectory has been consistent, with sequential improvements from 20.34% in March 2024 to the current quarter's record levels, demonstrating the company's operational leverage and pricing power.
Profit after tax margin expanded dramatically to 19.97% in Q2 FY26 from 11.42% in the corresponding quarter last year, reflecting both operational efficiency gains and favourable cost dynamics. The company's ability to convert revenue growth into disproportionate profit expansion—with net profit growing at 133.80% against revenue growth of 33.67%—underscores the quality of earnings and the effectiveness of operational strategies.
Cost management remained exemplary during the quarter. Employee costs, whilst increasing in absolute terms to ₹26.32 crores from ₹19.70 crores year-on-year, remained well-controlled as a percentage of sales. Interest costs continued their declining trend, falling to ₹3.91 crores from ₹4.53 crores in Q2 FY25, reflecting improved financial leverage and efficient capital structure management. The company's operating profit to interest coverage ratio reached an impressive 20.29 times, providing substantial cushion for debt servicing.
| Quarter | Revenue (₹ Cr) | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|
| Sep'25 | 256.65 | 51.25 | 30.91% | 19.97% |
| Jun'25 | 246.69 | 41.12 | 27.69% | 16.67% |
| Mar'25 | 217.83 | 28.59 | 25.02% | 13.12% |
| Dec'24 | 197.58 | 25.20 | 23.22% | 12.75% |
| Sep'24 | 192.00 | 21.92 | 20.97% | 11.42% |
| Jun'24 | 179.39 | 17.41 | 19.74% | 9.71% |
| Mar'24 | 170.56 | 19.34 | 20.34% | 11.34% |
Operational Excellence: Capacity Utilisation and Efficiency Gains
The company's operational performance has been nothing short of outstanding, as evidenced by its financial trend classification. Shaily Engineering Plastics achieved multiple all-time highs during Q2 FY26, including record operating profit to interest coverage of 20.29 times, highest-ever quarterly net sales of ₹256.65 crores, and peak operating profit to net sales ratio of 30.91%. These metrics collectively point to a business firing on all cylinders, with capacity utilisation improvements and operational leverage working in tandem.
The company's return on equity (ROE), whilst modest at 12.75% on an average basis, has shown improvement with the latest ROE standing at 17.00%. This upward trajectory in capital efficiency metrics reflects the maturing of recent capital investments and the company's ability to generate superior returns from deployed capital. The return on capital employed (ROCE) tells a similar story, with the latest ROCE at 18.79% compared to an average of 11.29%, indicating that recent capacity additions are yielding strong returns.
Key Operational Highlights
Record Performance Metrics: The company achieved its highest-ever operating profit to interest coverage ratio of 20.29 times, demonstrating exceptional debt servicing capability. Operating cash flow reached a record ₹95.61 crores on an annual basis, whilst quarterly PBDIT hit an all-time high of ₹79.33 crores. These metrics underscore the quality and sustainability of the company's earnings trajectory.
Balance sheet strength remains a cornerstone of Shaily's financial profile. The company maintains a conservative debt-to-EBITDA ratio of 1.43 times, well below concerning levels and providing ample headroom for future growth investments. Net debt to equity stands at a comfortable 0.30, reflecting prudent financial management. Shareholder funds have grown robustly to ₹547.69 crores as of March 2025, supported by consistent profit retention and minimal dividend payouts that prioritise reinvestment for growth.
Fixed assets increased to ₹500.70 crores in FY25 from ₹472.77 crores in FY24, indicating ongoing capital expenditure to support capacity expansion. This investment in productive assets, combined with improving asset turnover metrics, positions the company well for sustained revenue growth. The sales to capital employed ratio of 0.89 times, whilst below unity, has been improving and should continue to rise as new capacities ramp up to optimal utilisation levels.
Industry Context: Riding the Precision Engineering Wave
Shaily Engineering Plastics operates in the precision engineering plastics segment, catering primarily to healthcare, automotive, and industrial applications. The company's focus on high-precision injection moulding components positions it favourably in markets demanding stringent quality standards and technical expertise. The healthcare segment, in particular, has emerged as a significant growth driver, with increasing demand for medical devices and pharmaceutical packaging solutions.
The company's performance stands in stark contrast to its peer group within the plastic products industrial sector. Whilst the broader Plastic Products - Industrial sector delivered a negative return of -15.05% over the past year, Shaily Engineering Plastics generated a remarkable 116.02% return, outperforming its sector by 131.07 percentage points. This dramatic outperformance reflects the company's differentiated positioning in high-value, precision-engineered products rather than commoditised plastic goods.
Competitive Differentiation
Unlike many peers in the industrial plastics space who compete primarily on price in commoditised markets, Shaily has carved out a niche in precision-engineered components requiring technical sophistication and quality certifications. This positioning has enabled the company to command premium pricing, achieve superior margins, and maintain customer stickiness—advantages that become particularly pronounced during periods of raw material volatility or competitive intensity.
Peer Comparison: Premium Valuation, Superior Growth
When benchmarked against industry peers, Shaily Engineering Plastics presents a study in contrasts. The company trades at a price-to-earnings ratio of 97.55 times, significantly higher than peers such as Supreme Industries (57.38x), Astral (82.12x), Finolex Industries (28.95x), and Time Technoplast (23.61x). This valuation premium reflects market recognition of Shaily's superior growth trajectory, margin expansion potential, and quality of business model.
| Company | P/E (TTM) | P/BV | ROE | Dividend Yield | Debt/Equity |
|---|---|---|---|---|---|
| Shaily Engineer. | 97.55 | 20.81 | 12.75% | 0.08% | 0.30 |
| Supreme Inds. | 57.38 | 0.85 | 20.23% | 0.91% | -0.01 |
| Astral | 82.12 | 1.11 | 15.53% | 0.24% | -0.12 |
| Finolex Inds. | 28.95 | 1.89 | 12.83% | 1.94% | -0.33 |
| Time Technoplast | 23.61 | — | — | — | — |
| Garware Hi Tech | 24.28 | 3.34 | 10.14% | 0.35% | -0.27 |
The price-to-book value ratio of 20.81 times stands substantially above the peer average of approximately 1.80 times, indicating that the market is pricing in significant future growth and return improvements. Whilst Shaily's current ROE of 12.75% lags behind Supreme Industries' 20.23% and matches Finolex Industries' 12.83%, the improving trend in ROE—with the latest reading at 17.00%—suggests convergence towards peer-leading levels.
The company's minimal dividend yield of 0.08% reflects a deliberate strategy of capital retention for growth investments rather than shareholder distributions. With a dividend payout ratio of just 9.87%, Shaily is reinvesting the vast majority of profits into capacity expansion and operational improvements—a strategy that appears justified given the strong returns being generated on incremental capital deployed.
Valuation Analysis: Growth Premium Justified by Fundamentals
Shaily Engineering Plastics currently trades at what can only be described as a very expensive valuation by conventional metrics. With a P/E ratio of 97.55 times compared to the industry average of 41 times, the stock commands a substantial premium. The EV/EBITDA multiple of 55.34 times and EV/Sales ratio of 13.54 times further underscore the rich valuation assigned by the market.
However, context is crucial when evaluating these multiples. The company's PEG ratio of 1.11 suggests that the valuation, whilst elevated, is not entirely disconnected from growth fundamentals. With five-year EBIT growth of 43.59% and accelerating profitability trends, the premium valuation reflects market expectations of sustained high growth and margin expansion. The company's ability to deliver 133.80% profit growth in Q2 FY26 provides empirical support for these elevated multiples.
The stock's valuation history reveals that it has consistently traded at premium levels, with the valuation grade oscillating between "Expensive" and "Very Expensive" since late 2023. This persistent premium suggests that the market has developed conviction around the company's business model and growth trajectory, rather than viewing current levels as a temporary aberration.
Trading at ₹2,480.00, the stock sits approximately 6.92% below its 52-week high of ₹2,664.25 but remains 138.50% above its 52-week low of ₹1,039.85. This positioning near recent highs, combined with strong technical momentum (the stock is trading above all key moving averages), suggests continued investor confidence despite the elevated valuation multiples.
Shareholding Pattern: Institutional Confidence Building
The shareholding pattern reveals a notable shift in investor composition, with institutional investors demonstrating increasing conviction in Shaily's growth story. Foreign Institutional Investors (FIIs) have been the most aggressive accumulators, increasing their stake from 3.11% in September 2024 to 11.31% in September 2025—a substantial addition of 8.20 percentage points over four quarters. The sequential increase of 1.60% from June 2025 to September 2025 indicates sustained buying interest.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 43.72% | 43.72% | 43.72% | 43.72% | 0.00% |
| FII Holding | 11.31% | 9.71% | 7.39% | 5.42% | +1.60% |
| Mutual Fund | 11.87% | 12.66% | 11.64% | 9.39% | -0.79% |
| Insurance | 0.28% | 0.14% | 0.11% | 0.00% | +0.14% |
| Other DII | 1.56% | 1.33% | 1.98% | 2.26% | +0.23% |
| Non-Institutional | 31.27% | 32.43% | 35.17% | 39.20% | -1.16% |
Mutual fund holdings have stabilised at 11.87% after a marginal decline of 0.79% in the September quarter, suggesting portfolio rebalancing rather than a loss of conviction. The combined institutional holding of 25.01% represents significant smart money participation, with 86 FIIs and 9 mutual funds holding positions in the stock. Insurance companies have begun establishing positions, increasing their stake from nil to 0.28%, indicating broadening institutional interest.
Promoter holding remains rock-solid at 43.72%, with zero pledging of shares—a strong signal of promoter confidence and financial stability. The promoter group, led by key stakeholders including Tilottama Sanghvi (14.01%), Jayessh Mohanlal Shah (8.29%), and Mahendra Bhogilal Sanghvi (7.25%), maintains substantial skin in the game. The absence of pledged shares eliminates a key risk factor and provides comfort regarding corporate governance standards.
The gradual decline in non-institutional holdings from 40.73% in September 2024 to 31.27% in September 2025, mirrored by rising institutional participation, suggests a quality upgrade in the shareholder base. This transition typically precedes improved stock liquidity and reduced volatility, as institutional investors tend to be more stable holders compared to retail participants.
Stock Performance: Spectacular Multi-Year Returns
Shaily Engineering Plastics has been a standout performer across all timeframes, delivering exceptional returns that dwarf broader market performance. The stock has generated a 116.02% return over the past year, compared to the Sensex's 4.62% gain—an outperformance (alpha) of 111.40 percentage points. This stellar performance extends across longer periods, with two-year returns of 619.93%, three-year returns of 596.79%, and five-year returns of an astounding 1,847.85%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 9.11% | -0.86% | +9.97% |
| 1 Month | 2.98% | 1.57% | +1.41% |
| 3 Months | 55.67% | 3.22% | +52.45% |
| 6 Months | 53.95% | 3.06% | +50.89% |
| YTD | 69.87% | 6.50% | +63.37% |
| 1 Year | 116.02% | 4.62% | +111.40% |
| 2 Years | 619.93% | 28.14% | +591.79% |
| 3 Years | 596.79% | 36.01% | +560.78% |
The recent momentum has been particularly strong, with the stock delivering 55.67% returns over the past three months and 53.95% over six months. Even on a shorter timeframe, the performance remains impressive—9.11% over the past week and 2.98% over the past month. The stock is currently trading above all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), indicating robust technical strength and positive momentum across multiple timeframes.
From a risk-adjusted perspective, the stock has delivered a risk-adjusted return of 2.16 over the past year, compared to the Sensex's 0.37, despite higher volatility of 53.63% versus the Sensex's 12.35%. The stock's beta of 1.35 indicates it is more volatile than the broader market, classifying it as a high-beta, high-risk, high-return investment. This volatility profile is consistent with a growth stock experiencing rapid business transformation and market re-rating.
Technical indicators across the board flash bullish signals. The MACD is bullish on both weekly and monthly timeframes, Bollinger Bands indicate bullish momentum, and moving averages point upwards. The overall technical trend classification of "Bullish" since November 4, 2025, reinforces the positive fundamental narrative. The stock's ability to sustain these elevated levels despite the premium valuation speaks to the strength of underlying business momentum.
"With five-year EBIT growth of 43.59%, accelerating profitability, and operating margins expanding to record levels, Shaily Engineering Plastics exemplifies how operational excellence can drive exceptional shareholder returns even from elevated valuation bases."
Investment Thesis: Quality Growth at Premium Valuation
Shaily Engineering Plastics presents a compelling investment thesis built on multiple pillars of strength. The company's proprietary Mojo score of 82 out of 100, accompanied by a "Strong Buy" rating, reflects the confluence of positive factors including outstanding financial trends, bullish technical indicators, and good quality fundamentals. The score has remained consistently in the 75-82 range over recent months, oscillating between "Buy" and "Strong Buy" ratings, indicating sustained investment merit.
The investment case rests on several key strengths: exceptional debt servicing capability with a low debt-to-EBITDA ratio of 1.43 times, robust long-term growth with operating profit expanding at 43.59% annually, record-high operating profit to interest coverage of 17.65 times, and high institutional holdings of 25.01%. The company's ability to consistently achieve record metrics quarter after quarter demonstrates the sustainability of its competitive advantages.
However, investors must grapple with the "very expensive" valuation grade, which represents the primary risk factor. The P/E ratio of 97.55 times leaves little room for disappointment, and any deceleration in growth or margin compression could trigger significant multiple contraction. The modest average ROE of 12.75%, whilst improving, still lags some peers and suggests that capital efficiency, though advancing, has room for further enhancement.
Key Strengths & Risk Factors
Key Strengths ✓
- Exceptional Margin Expansion: Operating margins improved from 20.97% to 30.91% YoY, demonstrating pricing power and operational leverage
- Record Financial Performance: Multiple all-time highs including quarterly revenue, PBDIT, and profit metrics
- Strong Balance Sheet: Conservative debt-to-EBITDA of 1.43x and net debt-to-equity of 0.30 provide financial flexibility
- Robust Cash Generation: Operating cash flow reached record ₹95.61 crores annually, supporting growth investments
- Institutional Confidence: FII holdings increased 8.20 percentage points over four quarters to 11.31%
- Zero Promoter Pledging: Promoters maintain 43.72% stake with no pledged shares, indicating strong governance
- Improving Capital Efficiency: Latest ROE of 17.00% and ROCE of 18.79% show significant improvement from historical averages
Key Concerns ⚠
- Very Expensive Valuation: P/E of 97.55x and P/BV of 20.81x leave minimal margin for error or disappointment
- High Volatility Profile: Beta of 1.35 and volatility of 53.63% indicate significant price fluctuation risk
- Modest Historical ROE: Average ROE of 12.75% lags peers like Supreme Industries (20.23%)
- Minimal Dividend Yield: 0.08% yield provides no income cushion for investors
- Sector Headwinds: Broader Plastic Products sector delivered -15.05% returns, indicating challenging industry dynamics
- Execution Risk: Sustaining 30%+ margins and triple-digit profit growth may prove challenging
- Multiple Compression Risk: Any growth deceleration could trigger sharp valuation re-rating given elevated multiples
Outlook: What Lies Ahead
The forward outlook for Shaily Engineering Plastics hinges on the company's ability to sustain its exceptional operational momentum whilst managing valuation expectations. The ongoing capacity expansions, evidenced by rising fixed assets, should support revenue growth as these facilities ramp up to optimal utilisation levels. The company's focus on high-value precision engineering segments provides insulation from commoditised competition and supports margin sustainability.
Positive Catalysts
- Continued margin expansion from operating leverage and capacity utilisation improvements
- Growing institutional participation providing liquidity and stability to stock price
- Expanding addressable market in healthcare and medical devices segments
- Strong cash generation enabling organic growth without dilution
- Improving capital efficiency metrics (ROE/ROCE) as new capacities mature
Red Flags to Monitor
- Any deceleration in revenue growth below 20% YoY levels
- Margin compression from competitive pressures or raw material inflation
- Inability to sustain 15%+ PAT margins on a consistent basis
- Significant promoter selling or institutional exodus
- Deterioration in working capital management or cash flow generation
Key monitoring points include quarterly revenue trajectory, margin sustainability, institutional shareholding trends, and execution on capacity expansion plans. Investors should watch for any signs of growth deceleration or margin pressure, which could trigger valuation re-rating given the premium multiples. The company's ability to maintain operating margins above 25% and deliver consistent double-digit sequential growth will be critical to justifying current valuations.
The Verdict: Quality Growth Story with Valuation Caution
Score: 82/100
For Fresh Investors: Shaily Engineering Plastics represents a high-quality growth story with exceptional operational momentum and improving fundamentals. However, the very expensive valuation demands a cautious approach. Fresh investors should consider building positions gradually through systematic accumulation rather than aggressive buying, particularly during any price corrections. The stock is suitable for growth-oriented investors with high risk tolerance and a 3-5 year investment horizon who can withstand significant volatility.
For Existing Holders: Continue holding with conviction. The company's ability to deliver record financial performance quarter after quarter validates the premium valuation. The improving capital efficiency metrics, expanding institutional participation, and strong cash generation provide comfort for sustained wealth creation. Consider booking partial profits if the stock appreciates significantly above ₹2,600-2,700 levels to manage portfolio risk, but maintain core holdings given the strong business momentum.
Fair Value Estimate: ₹2,200-2,400 range based on sustainable 70-80x P/E multiple (11% downside to 3% upside from current levels). Current price of ₹2,480 is at the upper end of fair value, suggesting limited immediate upside but justified by exceptional growth trajectory.
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, and all investments carry risk of loss. The views expressed herein are those of the author and do not constitute recommendations to buy, sell, or hold any securities.
