Chambal Fertilisers & Chemicals Ltd: Valuation Shifts Signal Renewed Price Attractiveness

Valuation Metrics Signal Enhanced Price Appeal

As of 22 January 2026, Chambal Fertilisers & Chemicals Ltd trades at a price of ₹421.05, down 2.22% from the previous close of ₹430.60. The stock’s 52-week range spans from ₹410.15 to ₹742.45, indicating significant volatility over the past year. However, the recent contraction in price has coincided with a marked improvement in valuation grades, with the company’s price-to-earnings (P/E) ratio now standing at 9.06, a level that is widely regarded as attractive within the sector.

Complementing this, the price-to-book value (P/BV) ratio has settled at 1.71, reinforcing the stock’s repositioning as a value proposition. These figures contrast favourably against historical averages and peer benchmarks, where many competitors maintain higher multiples, reflecting either stronger growth expectations or market overvaluation.

Comparative Analysis with Sector Peers

Within the fertilizers industry, Chambal Fertilisers’ valuation metrics place it among the more attractively priced stocks. For instance, Deepak Fertilisers trades at a P/E of 14.88 and an EV/EBITDA of 9.40, while Paradeep Phosphates commands a P/E of 13.85 and EV/EBITDA of 9.29. Even RCF and GSFC, both rated attractive, exhibit higher P/E ratios of 22.79 and 10.05 respectively. Chambal’s EV/EBITDA ratio of 6.31 further underscores its relative undervaluation compared to these peers.

Notably, the PEG ratio of 0.43 suggests that the stock is undervalued relative to its earnings growth potential, a metric that often appeals to value-oriented investors seeking growth at a reasonable price. This is particularly significant given the company’s robust return on capital employed (ROCE) of 24.47% and return on equity (ROE) of 18.93%, which indicate efficient capital utilisation and profitability.

Market Performance and Returns Contextualise Valuation

Despite the improved valuation, Chambal Fertilisers has underperformed the broader market in the short term. Year-to-date, the stock has declined by 12.65%, compared to a 3.89% drop in the Sensex. Over the past year, the stock’s return stands at -14.81%, while the Sensex has gained 8.01%. However, the longer-term performance tells a more positive story, with a three-year return of 38.64% surpassing the Sensex’s 35.12%, and an impressive ten-year return of 679.00% compared to the Sensex’s 241.83%.

This divergence suggests that while near-term sentiment remains cautious, the company’s fundamentals and valuation improvements may offer a foundation for renewed investor interest and potential recovery.

Financial Strength and Dividend Yield Support Investment Case

Chambal Fertilisers’ financial metrics further bolster its investment appeal. The company’s enterprise value to capital employed (EV/CE) ratio is a modest 1.78, indicating efficient use of capital relative to its valuation. Additionally, the dividend yield of 2.38% provides a steady income stream, which can be attractive in a sector often characterised by cyclical earnings.

These factors, combined with a solid ROCE and ROE, suggest that the company maintains operational strength despite recent market headwinds, supporting the rationale behind the upgraded valuation grade from fair to attractive.

Mojo Score Upgrade Reflects Changing Market Perception

Reflecting these developments, MarketsMOJO has upgraded Chambal Fertilisers & Chemicals Ltd’s Mojo Grade from Sell to Hold as of 19 January 2026, with a current Mojo Score of 52.0. This upgrade signals a more balanced outlook, recognising the improved valuation and financial metrics while acknowledging ongoing challenges in price momentum and sector dynamics.

The company’s market capitalisation grade remains at 3, consistent with its small-cap status, which often entails higher volatility but also greater upside potential for discerning investors.

Risks and Considerations for Investors

While the valuation shift is encouraging, investors should remain mindful of the sector’s inherent cyclicality and the company’s recent price underperformance. The stock’s one-week and one-month returns of -5.60% and -5.31% respectively, both lagging the Sensex, highlight ongoing volatility. Furthermore, the current price remains closer to the 52-week low than the high, signalling caution.

Additionally, the broader fertiliser industry faces challenges such as fluctuating input costs, regulatory changes, and global commodity price pressures, which could impact earnings and valuation multiples going forward.

Conclusion: Valuation Improvement Offers Strategic Entry Point

In summary, Chambal Fertilisers & Chemicals Ltd’s recent valuation upgrade from fair to attractive, supported by a low P/E of 9.06, reasonable P/BV of 1.71, and strong profitability metrics, presents a compelling case for investors seeking value in the fertilizers sector. Although short-term price performance has been weak, the company’s long-term returns and operational efficiency provide a solid foundation for potential recovery.

Investors should weigh these positives against sector risks and market volatility, considering the upgraded Mojo Grade Hold as a signal to monitor the stock closely for further developments.

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