Century Enka Ltd Valuation Shifts Signal Heightened Price Risk Amid Mixed Returns

Valuation Metrics: A Closer Look

As of 9 February 2026, Century Enka Ltd trades at ₹468.45, up 1.84% from the previous close of ₹460.00. The stock’s 52-week range spans ₹408.10 to ₹615.00, indicating a moderate recovery from its lows but still below its peak levels. The company’s current P/E ratio stands at 17.51, a figure that has contributed to its reclassification from expensive to very expensive in valuation terms. This is particularly significant given the company’s P/BV ratio of 0.71, which remains below 1, suggesting that the market values the company at less than its book value despite the elevated P/E.

Other valuation multiples include an EV/EBITDA of 7.97 and an EV/EBIT of 21.66, which, when juxtaposed with sector peers, reveal a mixed picture. The EV/EBITDA multiple is relatively moderate, indicating some operational efficiency, but the EV/EBIT is on the higher side, reflecting pressure on earnings before interest and taxes.

Peer Comparison Highlights Valuation Extremes

Within the Garments & Apparels industry, Century Enka’s valuation stands out as very expensive, yet it is not alone in this category. Peers such as R&B Denims and SBC Exports trade at significantly higher P/E ratios of 45.79 and 48.65 respectively, with EV/EBITDA multiples exceeding 30. Sumeet Industries and Pashupati Cotsp. also command lofty valuations, with P/E ratios above 70 and 89 respectively. Conversely, companies like Sportking India and Mafatlal Industries present more attractive valuations, with P/E ratios of 11.21 and 10.36, and EV/EBITDA multiples below 9.

Notably, Indo Rama Synth. is classified as very attractive with a P/E of 7.66 and EV/EBITDA of 7.36, underscoring the valuation disparity within the sector. This divergence highlights the premium investors are willing to pay for Century Enka despite its modest return on capital employed (ROCE) of 2.90% and return on equity (ROE) of 4.07%, both of which lag behind sector averages.

Historical Performance Versus Sensex

Century Enka’s stock returns over various time horizons reveal a nuanced performance relative to the broader market. Over the past week, the stock surged 8.01%, significantly outperforming the Sensex’s 1.59% gain. The one-month and year-to-date returns also remain positive at 5.66% and 5.91%, respectively, while the Sensex declined by 1.74% and 1.92% over the same periods.

However, the one-year return paints a less favourable picture, with Century Enka falling 14.83% compared to the Sensex’s 7.07% rise. Over longer horizons, the stock has delivered 17.82% over three years and an impressive 84.94% over five years, outperforming the Sensex’s 38.13% and 64.75% respectively. The ten-year return of 171.09% trails the Sensex’s 239.52%, indicating that while the company has generated substantial wealth for investors, it has lagged the benchmark index over the decade.

Mojo Score and Rating Update

MarketsMOJO’s latest assessment assigns Century Enka a Mojo Score of 41.0, reflecting a Sell rating. This marks an upgrade from the previous Strong Sell grade issued on 21 August 2025, signalling a modest improvement in the company’s outlook. The Market Cap Grade remains low at 4, consistent with its micro-cap status within the Garments & Apparels sector.

Despite the upgrade, the valuation grade has shifted from expensive to very expensive, underscoring the market’s heightened expectations. The PEG ratio remains at zero, indicating no meaningful growth premium is currently priced in, which may concern value-oriented investors seeking growth justification for the premium valuation.

Dividend Yield and Profitability Metrics

Century Enka offers a dividend yield of 2.13%, a modest return that may appeal to income-focused investors but is unlikely to offset concerns about valuation. The company’s ROCE of 2.90% and ROE of 4.07% are subdued, suggesting limited efficiency in capital utilisation and shareholder returns. These metrics lag behind many peers, which may explain the cautious stance from analysts despite the recent price appreciation.

Implications for Investors

The transition of Century Enka’s valuation from expensive to very expensive warrants careful consideration. While the stock has demonstrated resilience in recent months and outperformed the Sensex in short-term periods, its subdued profitability metrics and premium multiples relative to peers suggest limited margin for error.

Investors should weigh the company’s modest dividend yield and improving Mojo Score against the elevated P/E and EV/EBIT multiples. The low PEG ratio indicates that growth expectations are not currently embedded in the price, which could either signal undervaluation if growth materialises or overvaluation if earnings stagnate.

Comparisons with sector peers reveal that more attractively valued alternatives exist, particularly among companies with stronger capital returns and lower valuation multiples. This is a critical factor for investors seeking to optimise portfolio allocation within the Garments & Apparels sector.

Looking Ahead

Century Enka’s valuation dynamics reflect a market grappling with balancing growth prospects against fundamental performance. The company’s ability to improve operational efficiency, enhance returns on capital, and sustain dividend payouts will be pivotal in justifying its current premium valuation.

Given the current metrics, a cautious approach is advisable. Investors may consider monitoring quarterly earnings updates and sector trends closely to reassess the stock’s attractiveness as new data emerges.

Summary

In summary, Century Enka Ltd’s recent valuation shift to very expensive status, despite a modest improvement in rating, highlights the complexities investors face in the Garments & Apparels sector. While short-term price momentum is positive, fundamental indicators and peer comparisons suggest that the stock’s price attractiveness has diminished. A balanced, data-driven approach remains essential for navigating this evolving landscape.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →