Arex Industries Ltd Valuation Shifts Signal Changing Market Sentiment

Valuation Metrics and Their Implications

As of 4 February 2026, Arex Industries trades at ₹147.95, up 4.93% on the day, with a market capitalisation grade of 4. The company’s price-to-earnings (P/E) ratio stands at 30.08, a figure that, while elevated compared to some peers, remains within an attractive valuation band given the sector’s dynamics. The price-to-book value (P/BV) ratio is 1.98, indicating that the stock is priced just below twice its book value, a level that suggests moderate investor confidence in the company’s asset base.

Other valuation multiples include an enterprise value to EBIT (EV/EBIT) of 19.32 and an EV to EBITDA of 8.38, both reflecting a balanced valuation stance. The EV to capital employed ratio is 1.70, and EV to sales is 1.28, underscoring a valuation that is neither stretched nor deeply discounted. Notably, the PEG ratio is reported as zero, which may indicate either a lack of meaningful earnings growth projections or data unavailability, warranting cautious interpretation.

Comparative Peer Analysis

When benchmarked against its peers in the Garments & Apparels industry, Arex Industries’ valuation appears relatively attractive. For instance, R&B Denims and Sumeet Industries are classified as very expensive, with P/E ratios of 44.18 and 75.78 respectively, and EV/EBITDA multiples exceeding 30. Similarly, SBC Exports and Pashupati Cotsp. trade at very expensive levels, with P/E ratios above 60 and EV/EBITDA multiples above 50.

Conversely, companies like Sportking India and Mafatlal Industries are rated attractive, with P/E ratios of 11.05 and 10.88 and EV/EBITDA multiples below 10. Indo Rama Synth., rated very attractive, trades at a P/E of 7.8 and EV/EBITDA of 7.43, highlighting a spectrum of valuation levels within the sector. Arex’s position in this context suggests it is priced reasonably relative to its growth prospects and profitability metrics.

Financial Performance and Returns

Arex Industries’ return on capital employed (ROCE) is 11.81%, while return on equity (ROE) is 6.58%. These figures indicate moderate efficiency in generating returns from capital and equity, though they lag behind some higher-performing peers. The absence of a dividend yield further emphasises the company’s focus on reinvestment or growth rather than shareholder payouts at this stage.

Examining stock returns relative to the Sensex reveals a mixed picture. Over the past week and month, Arex has outperformed the benchmark, delivering returns of 4.41% and 11.24% respectively, compared to Sensex declines of 2.30% and 2.36%. Year-to-date, the stock is up 5.68% while the Sensex is down 1.74%. However, over the one-year horizon, Arex has underperformed with a -4.61% return versus the Sensex’s 8.49% gain. Longer-term returns over five and ten years remain robust at 146.58% and 169.00%, though they trail the Sensex’s 66.63% and 245.70% respectively.

Mojo Score and Rating Evolution

MarketsMOJO assigns Arex Industries a Mojo Score of 20.0, categorising it with a Strong Sell grade as of 19 June 2025, an upgrade from the previous Sell rating. This downgrade in sentiment reflects concerns over valuation pressures and operational challenges despite the company’s attractive price multiples relative to peers. The rating change signals caution for investors, emphasising the need to weigh valuation attractiveness against underlying business risks.

Price Attractiveness in Context

The shift from a very attractive to an attractive valuation grade suggests that while Arex Industries remains a reasonably priced option within the Garments & Apparels sector, the margin of safety has narrowed. The P/E ratio of 30.08, though lower than many peers, is elevated compared to historical averages for the company and the sector, indicating that investors are pricing in moderate growth expectations. The P/BV ratio near 2.0 also points to a valuation that is fair but not deeply discounted.

Investors should consider that the company’s EV/EBITDA multiple of 8.38 is competitive, especially against very expensive peers with multiples exceeding 30. This suggests that Arex Industries offers a more balanced risk-reward profile, particularly for those seeking exposure to the garments and apparel space without paying a premium for growth.

Investor Takeaways and Outlook

For investors evaluating Arex Industries, the current valuation presents a cautiously optimistic opportunity. The company’s attractive multiples relative to expensive peers may appeal to value-oriented investors seeking exposure to the garments and apparels sector. However, the Strong Sell Mojo Grade and moderate returns on equity and capital employed highlight underlying challenges that could temper near-term performance.

Long-term investors may find merit in Arex’s consistent price strength and fundamental track record, as evidenced by its outperformance over the past five years compared to the Sensex. Yet, the recent upgrade in valuation grade signals that the stock’s margin of safety has diminished, necessitating careful monitoring of operational developments and sector trends.

In summary, Arex Industries Ltd’s valuation shift from very attractive to attractive reflects a nuanced market reassessment. While the stock remains competitively priced within its peer group, investors should balance this against the company’s financial metrics and the broader market environment before making allocation decisions.

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