Madras Fertilizers Sees Adjustment in Evaluation Across Quality, Valuation, Financial Trend, and Technicals

On 19 November 2025, Madras Fertilizers’ score grade experienced a call change, shifting its quality grade from below average to average. This adjustment is underpinned by a five-year sales growth rate of 10.30% and an EBIT growth rate of 16.15%, indicating a moderate expansion in operational scale and profitability over the medium term. The company’s average EBIT to interest coverage ratio stands at 2.26, suggesting a reasonable ability to meet interest obligations, although the debt to EBITDA ratio remains elevated at 10.13, signalling a relatively high leverage position. Notably, the net debt to equity ratio averages at zero, reflecting a neutral stance on net borrowings relative to shareholder equity.

Operational efficiency metrics such as sales to capital employed average 2.22, while the tax ratio is recorded at 28.29%. Institutional holding remains minimal at 0.14%, and pledged shares are non-existent, indicating limited insider encumbrance. However, the company’s return on capital employed (ROCE) averages at a negative 46.14%, contrasting sharply with a return on equity (ROE) average of 320.52%, which may reflect accounting or capital structure peculiarities. When compared with peers in the fertilisers industry, Madras Fertilizers’ quality grade aligns with other average-rated companies such as Rashtriya Chemicals and Fertilizers (RCF) and Mangalore Chemicals, while competitors like Chambal Fertilisers and Deepak Fertilisers maintain a good quality grade.

Valuation metrics have also seen a notable revision, with Madras Fertilizers’ valuation grade moving from a non-qualifying status to very attractive. The company’s price-to-earnings (PE) ratio is recorded at 16.27, which is competitive within the fertilisers sector. The enterprise value to EBIT ratio stands at 11.26, and enterprise value to EBITDA at 10.12, both indicating a valuation that is reasonable relative to earnings before interest, taxes, depreciation, and amortisation. The enterprise value to sales ratio is particularly low at 0.49, suggesting the stock is trading at a modest multiple of its sales. However, the enterprise value to capital employed ratio is negative at -70.14, reflecting complexities in capital structure or accounting treatments. The PEG ratio is zero, and dividend yield data is not available. The latest ROCE figure is negative due to capital employed considerations, while the latest ROE remains high at 320.52%, reinforcing the valuation attractiveness despite some financial anomalies.

Comparatively, peers such as Chambal Fertilisers and Deepak Fertilisers hold fair to attractive valuation grades, with PE ratios ranging from 10 to 18 and EV/EBITDA multiples generally below 12. Madras Fertilizers’ valuation stands out as very attractive within this peer group, supported by its current market price of ₹80.00, which is below its 52-week high of ₹108.55 and above the 52-week low of ₹66.34. The stock’s daily trading range on the trigger date was between ₹80.00 and ₹83.04, with a day change of -1.27%.

From a financial trend perspective, Madras Fertilizers has exhibited mixed signals. The company’s returns over various periods show a divergence from broader market indices. For instance, over the past week and month, the stock has recorded negative returns of -1.79% and -1.16% respectively, while the Sensex posted positive returns of 0.96% and 0.86% over the same periods. Year-to-date, the stock’s return is -16.05%, contrasting with the Sensex’s 8.36%. Over one year, Madras Fertilizers’ return is -12.09%, while the Sensex gained 9.48%. However, over longer horizons, the stock has outperformed the market, with five-year and ten-year returns of 373.37% and 520.16% respectively, compared to the Sensex’s 91.65% and 232.28% over the same periods.

Quarterly financial results for Q2 FY25-26 reveal a challenging environment. Profit before tax excluding other income (PBT less OI) was reported at a loss of ₹5.25 crores, representing a decline of 143.3% relative to the previous four-quarter average. Profit after tax (PAT) for the quarter was ₹12.95 crores, down by 23.6% compared to the prior four-quarter average. The company’s debt-to-equity ratio at half-year end was notably high at 23.64 times, indicating significant leverage. Despite the company’s sizeable market capitalisation, domestic mutual funds hold a negligible stake of 0.01%, which may reflect cautious positioning or limited confidence in the current price or business outlook.

Technically, the stock’s price movement reflects a degree of volatility and underperformance relative to the broader market. The current price of ₹80.00 is below the previous close of ₹81.03, and the stock has traded within a 52-week range of ₹66.34 to ₹108.55. This price behaviour, combined with the recent downward movement and the day’s low at ₹80.00, suggests cautious investor sentiment. The divergence between the company’s long-term returns and recent short-term performance highlights the importance of monitoring technical indicators alongside fundamental factors.

In summary, the adjustment in Madras Fertilizers’ evaluation is driven by a combination of factors. The quality parameter reflects moderate growth and operational metrics, while valuation metrics indicate a very attractive price relative to earnings and sales. Financial trends reveal recent quarterly challenges and underperformance against market benchmarks in the short term, contrasted by strong long-term returns. Technical indicators suggest a cautious trading environment with price volatility. Investors analysing Madras Fertilizers should consider these multifaceted aspects in the context of the fertilisers sector and broader market conditions.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →