Fiberweb (India) Ltd Upgraded to Sell on Improved Valuation and Mixed Fundamentals

Quality Assessment: Weak Fundamentals Persist

Fiberweb (India) operates in the Garments & Apparels sector, a competitive and cyclical industry. The company’s quality rating remains low, consistent with its previous assessment. Over the last five years, Fiberweb has exhibited a negative compound annual growth rate (CAGR) of -1.33% in operating profits, signalling deteriorating operational efficiency. Its average return on equity (ROE) stands at a modest 5.70%, indicating limited profitability generated per unit of shareholder funds. The latest ROE figure is slightly improved at 9.00%, but still below industry averages.

Return on capital employed (ROCE) is recorded at 9.22%, which is moderate but insufficient to suggest robust capital utilisation. The company’s flat financial results in Q3 FY25-26 further underscore the lack of momentum in earnings growth. These factors collectively maintain Fiberweb’s low quality grade, reflecting weak long-term fundamental strength.

Valuation Upgrade: From Attractive to Very Attractive

The most significant driver behind the rating upgrade is the company’s improved valuation profile. Fiberweb’s price-to-earnings (PE) ratio stands at a low 7.22, substantially below many of its peers such as R&B Denims (PE 57.33) and SBC Exports (PE 51.34). The price-to-book (P/B) value is also very low at 0.65, indicating the stock is trading at a steep discount to its net asset value.

Enterprise value to EBITDA (EV/EBITDA) ratio is 5.47, and EV to EBIT is 7.20, both suggesting undervaluation relative to earnings before interest, taxes, depreciation, and amortisation. The PEG ratio, which adjusts PE for earnings growth, is an attractive 0.32, signalling that the stock’s price is low relative to its earnings growth potential. This contrasts sharply with peers like Pashupati Cotsp. (PEG 1.68) and R&B Denims (PEG 3.53).

These valuation metrics have prompted MarketsMOJO to upgrade Fiberweb’s valuation grade from attractive to very attractive, reflecting a compelling entry point for value-oriented investors despite the company’s operational challenges.

Financial Trend: Flat Performance Amidst Market Underperformance

Fiberweb’s recent quarterly results for Q3 FY25-26 were largely flat, with no significant growth in revenues or profits. This stagnation is consistent with the company’s weak five-year operating profit trend. Despite this, the company’s profits have risen by 22.5% over the past year, a positive sign that has not yet translated into share price gains.

In terms of stock returns, Fiberweb has underperformed the broader market significantly. Over the last one year, the stock has declined by 4.60%, while the BSE500 index has delivered a robust 13.47% return. Over longer periods, the stock’s performance remains subdued relative to the Sensex benchmark, with a 5-year return of 41.16% compared to Sensex’s 61.92%, and a 10-year return of 105.45% versus Sensex’s 256.13%.

This underperformance, coupled with flat financials, keeps the financial trend rating cautious despite the recent profit uptick.

Technicals: Negative Short-Term Momentum

From a technical perspective, Fiberweb’s stock price has shown weakness in recent sessions. On 25 Feb 2026, the stock closed at ₹41.50, down 4.16% from the previous close of ₹43.30. The day’s trading range was narrow, with a low of ₹41.50 and a high of ₹42.21. The stock is currently trading closer to its 52-week low of ₹31.27 than its 52-week high of ₹59.44, indicating subdued investor sentiment.

Short-term price momentum is negative, reflecting the broader market’s cautious stance on the company. The downgrade from Strong Sell to Sell reflects this tempered technical outlook, despite the improved valuation.

Shareholding and Market Capitalisation

Fiberweb’s majority shareholders are non-institutional, which may contribute to lower liquidity and higher volatility. The company holds a market cap grade of 4, indicating a mid-sized market capitalisation relative to its sector peers. This size factor may limit institutional interest and analyst coverage, impacting the stock’s visibility and trading volumes.

Comparative Valuation Context

When compared with its industry peers, Fiberweb’s valuation stands out as highly attractive. For instance, R&B Denims and SBC Exports trade at PE ratios above 50 and EV/EBITDA multiples exceeding 40, reflecting premium valuations driven by stronger growth prospects or market positioning. In contrast, Fiberweb’s PE of 7.22 and EV/EBITDA of 5.47 suggest the market is pricing in significant risks or underperformance.

However, the company’s PEG ratio of 0.32 indicates that earnings growth is not fully reflected in the share price, presenting a potential value opportunity for investors willing to look beyond short-term challenges.

Outlook and Investment Implications

Despite the upgrade to a Sell rating, investors should approach Fiberweb with caution. The company’s weak long-term fundamentals and flat recent financial performance limit its appeal as a growth stock. However, the very attractive valuation metrics provide a compelling case for value investors seeking exposure to the Garments & Apparels sector at a discount.

Investors should monitor upcoming quarterly results for signs of operational improvement and watch for any shifts in market sentiment that could trigger a technical rebound. Given the stock’s underperformance relative to the broader market and peers, a turnaround would require sustained earnings growth and improved return ratios.

In summary, Fiberweb (India) Ltd’s rating upgrade reflects a nuanced view: valuation has improved markedly, but quality, financial trend, and technical indicators remain subdued. This balanced assessment aligns with a Sell rating, signalling that while the stock is no longer a strong sell, it still carries risks that investors must weigh carefully.

Limited Period Only. Start at Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Get 71% Off →