Understanding the Current Rating
The 'Hold' rating assigned to Narmada Gelatines Ltd indicates a neutral stance for investors, suggesting that the stock is expected to perform in line with the market or sector averages in the near term. This rating is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the stock’s investment potential and risk profile.
Quality Assessment
As of 25 December 2025, Narmada Gelatines Ltd demonstrates a good quality grade. The company exhibits high management efficiency, reflected in a robust Return on Capital Employed (ROCE) of 16.07%, signalling effective utilisation of capital to generate profits. Additionally, the Return on Equity (ROE) stands at a healthy 16.9%, underscoring the company’s ability to generate returns for shareholders. The low average Debt to Equity ratio of 0.05 times further highlights a conservative capital structure, reducing financial risk and interest burden. These quality metrics suggest a stable operational foundation, which is favourable for long-term investors.
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- - Fundamental Analysis
- - Technical Signals
- - Peer Comparison
Valuation Perspective
Currently, the company’s valuation is considered attractive. The stock trades at a Price to Book Value (P/BV) of approximately 1.7, which is reasonable when compared to its peers and historical averages. Despite the stock’s negative return of -8.59% over the past year as of 25 December 2025, the company’s profits have increased by 30.6% during the same period. This disparity is reflected in a low Price/Earnings to Growth (PEG) ratio of 0.3, indicating that the stock may be undervalued relative to its earnings growth potential. Such valuation metrics suggest that the market may not have fully priced in the company’s improving profitability, presenting a cautious opportunity for investors.
Financial Trend Analysis
The financial trend for Narmada Gelatines Ltd is positive. The latest quarterly results for September 2025 reveal the highest PBDIT (Profit Before Depreciation, Interest and Taxes) at ₹9.35 crores and an operating profit margin of 18.26%, both marking peak levels for the company. Furthermore, Profit Before Tax excluding other income (PBT less OI) grew by 47.6% compared to the previous four-quarter average, reaching ₹8.50 crores. However, the company’s long-term sales growth remains modest, with net sales increasing at an annual rate of 9.60% over the last five years. This steady but unspectacular growth rate tempers expectations for rapid expansion but supports a stable earnings base.
Technical Outlook
From a technical standpoint, the stock is currently mildly bearish. While it has shown some short-term gains—such as a 2.65% increase in the last trading day and a 4.60% rise over the past month—the stock has underperformed broader benchmarks like the BSE500 consistently over the last three years. The year-to-date return stands at -8.26%, and the one-year return is -8.59%, indicating a lack of strong upward momentum. This technical weakness suggests that investors should be cautious and monitor price action closely before committing additional capital.
Stock Performance and Market Context
As of 25 December 2025, Narmada Gelatines Ltd remains a microcap player within the Specialty Chemicals sector. The stock’s recent performance has been mixed, with short-term gains offset by longer-term underperformance relative to the broader market. The company’s promoter group holds a majority stake, which often provides stability in governance and strategic direction. However, the consistent underperformance against the BSE500 index over the past three years highlights challenges in delivering superior shareholder returns.
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What This Rating Means for Investors
The 'Hold' rating for Narmada Gelatines Ltd suggests that investors should maintain their current positions without expecting significant near-term gains or losses. The company’s solid quality metrics and attractive valuation provide a foundation for stability, while the positive financial trends indicate potential for gradual improvement. However, the mild bearish technical signals and historical underperformance caution against aggressive buying at this stage.
Investors seeking exposure to the Specialty Chemicals sector may consider Narmada Gelatines Ltd as a steady, albeit modest, performer. The stock’s low debt levels and efficient management reduce financial risk, but the limited long-term sales growth and subdued price momentum imply that substantial capital appreciation may require patience and favourable market conditions.
In summary, the current 'Hold' rating reflects a balanced view that recognises both the strengths and limitations of Narmada Gelatines Ltd as of 25 December 2025. Investors should weigh these factors carefully in the context of their portfolio objectives and risk tolerance.
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