The adjustment in evaluation for Himadri Speciality Chemical is primarily influenced by changes across four key parameters. Firstly, the quality aspect reflects a flat financial performance in the second quarter of FY25-26, with net sales at ₹1,071.03 crore showing a decline of 5.4% compared to the previous four-quarter average. Despite this, the company’s return on equity (ROE) stands at a robust 16.1%, indicating a reasonable level of profitability relative to shareholder equity. However, the interest expense over the last six months has risen to ₹30.61 crore, marking a growth of 49.17%, while the half-year debt-to-equity ratio has reached 1.99 times, the highest recorded, signalling increased leverage.
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Secondly, valuation metrics present a complex scenario. Himadri Speciality Chemical’s price-to-book value ratio is at 5.6, which is considered very expensive relative to its peers’ historical averages. This premium valuation contrasts with the company’s recent stock returns, which have been negative over the past year at -9.80%, while the broader market index BSE500 has generated positive returns of 8.30% during the same period. The price-earnings-to-growth (PEG) ratio stands at 1, reflecting a balance between earnings growth and valuation. Over the longer term, however, the stock has demonstrated significant appreciation, with returns of 925.28% over five years and an impressive 2,776.04% over ten years, far outpacing the Sensex’s respective returns of 91.65% and 232.28%.
Thirdly, the financial trend shows a mixed outlook. While the recent quarter’s results are flat, the company has exhibited healthy long-term growth with net sales increasing at an annual rate of 25.37% and operating profit growing by 65.69%. Despite the recent sales decline, the company’s average debt-to-equity ratio remains low at 0.20 times, suggesting a generally conservative capital structure over time. Profit growth over the past year has been notable at 36.1%, even as the stock price has underperformed the market.
Finally, technical indicators have shifted, influencing the overall evaluation. The technical trend has moved from mildly bullish to mildly bearish. Weekly and monthly MACD readings are bearish and mildly bearish respectively, while Bollinger Bands indicate bearish trends on both weekly and monthly charts. The relative strength index (RSI) shows no significant signals on weekly or monthly timeframes. Moving averages on a daily basis remain mildly bullish, but other momentum indicators such as the KST and Dow Theory present mixed signals, with weekly KST bearish and monthly mildly bearish, and Dow Theory mildly bullish weekly but showing no trend monthly. On-balance volume (OBV) remains neutral. These technical shifts suggest a cautious stance on the stock’s near-term momentum.
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In terms of price action, Himadri Speciality Chemical’s current price stands at ₹450.10, down from the previous close of ₹456.25. The stock’s 52-week high is ₹606.55, while the 52-week low is ₹351.40. Today’s trading range has been between ₹449.25 and ₹457.60, reflecting some volatility within a relatively narrow band. The stock’s returns over various periods highlight a divergence from the broader market: a one-week return of -1.92% against Sensex’s 0.96%, one-month return of -1.41% versus Sensex’s 0.86%, and a year-to-date return of -23.05% compared to Sensex’s 8.36%. Over three and five years, however, the stock has significantly outperformed the Sensex, underscoring its long-term growth potential despite recent setbacks.
Overall, the adjustment in Himadri Speciality Chemical’s evaluation reflects a comprehensive review of its financial health, valuation, and technical outlook. The company’s flat recent financial results, elevated valuation multiples, and shifting technical indicators have contributed to this reassessment. Investors may consider these factors alongside the company’s strong long-term growth trajectory and sector positioning within specialty chemicals.
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