Federal-Mogul Goetze (India) Ltd Valuation Shifts to Very Attractive Amid Sector Volatility

Valuation Metrics Reflect Enhanced Price Appeal

As of the latest assessment, Federal-Mogul Goetze's P/E ratio stands at 14.09, a marked reduction compared to many of its industry peers. This figure is considerably lower than Endurance Technologies’ P/E of 41.67 and Motherson Wiring’s 52.64, signalling a more reasonable price relative to earnings. The company’s price-to-book value is also at a modest 1.87, reinforcing the notion of undervaluation when juxtaposed with sector heavyweights such as JBM Auto and Gabriel India, whose P/BV ratios are substantially higher.

Further valuation multiples bolster this positive outlook. The enterprise value to EBITDA (EV/EBITDA) ratio is 6.21, which is significantly more conservative than the likes of ZF Commercial at 41.42 and Minda Corporation at 24.47. Additionally, the EV to EBIT ratio of 8.76 and EV to capital employed at 2.68 underscore the company’s efficient capital utilisation and operational profitability relative to its market valuation.

Strong Operational Metrics Support Valuation

Federal-Mogul Goetze’s return on capital employed (ROCE) is an impressive 30.65%, indicating robust operational efficiency and effective use of capital. The return on equity (ROE) of 13.29% further confirms the company’s ability to generate shareholder value. These metrics provide a solid foundation for the stock’s valuation upgrade, suggesting that the market may have previously undervalued the company’s earnings potential and asset base.

Moreover, the company’s PEG ratio of 0.46 is well below 1, signalling that the stock is undervalued relative to its earnings growth prospects. This contrasts sharply with peers such as Endurance Technologies and ZF Commercial, whose PEG ratios exceed 3, indicating potentially stretched valuations.

Price Movement and Market Capitalisation Context

Federal-Mogul Goetze’s current market price is ₹457.85, down 3.51% on the day, with a 52-week high of ₹622.00 and a low of ₹308.10. Despite the recent dip, the stock has delivered a 15.91% return over the past year, outperforming the Sensex’s 7.72% gain over the same period. Over three years, the stock has appreciated by 47.57%, again surpassing the Sensex’s 40.53% rise, though it trails the broader index over five and ten-year horizons.

The company’s market cap grade remains modest at 3, reflecting its mid-tier size within the auto components sector. This positioning offers a blend of growth potential and relative stability, especially given the company’s improved valuation and operational metrics.

Comparative Valuation: Federal-Mogul Goetze vs Peers

When compared with its peers in the auto components and equipment sector, Federal-Mogul Goetze’s valuation stands out for its relative conservatism and attractiveness. Endurance Technologies, rated as attractive, trades at nearly three times the P/E ratio of Federal-Mogul Goetze, while Motherson Wiring and JBM Auto are classified as expensive with P/E ratios above 50 and 70 respectively.

EV/EBITDA multiples further highlight the valuation gap. Federal-Mogul Goetze’s 6.21 multiple is less than a third of Endurance Technologies’ 21.21 and a fraction of ZF Commercial’s 41.42. This disparity suggests that investors are paying a premium for growth or market positioning in these peers, whereas Federal-Mogul Goetze offers a more value-oriented proposition.

Such valuation differentials are critical for investors seeking to balance growth with price discipline. The company’s very attractive valuation grade, upgraded from attractive on 20 Nov 2025, reflects this recalibration in market perception.

Stock Performance Relative to Sensex and Sector Trends

Federal-Mogul Goetze’s stock has demonstrated resilience and outperformance relative to the benchmark Sensex over medium-term horizons. Its 1-year return of 15.91% nearly doubles the Sensex’s 7.72%, while its 3-year return of 47.57% also exceeds the Sensex’s 40.53%. However, over five and ten years, the stock has lagged the broader market, indicating periods of underperformance that may have contributed to its recent valuation reset.

Shorter-term returns have been modestly negative, with a 1-week decline of 0.92% and a 1-month drop of 0.68%, slightly outperforming the Sensex’s sharper falls over the same periods. Year-to-date, the stock is down 1.80%, marginally worse than the Sensex’s 1.22% decline, reflecting some near-term volatility amid broader market uncertainties.

Mojo Score and Rating Update

Federal-Mogul Goetze currently holds a Mojo Score of 67.0, which corresponds to a Mojo Grade of Hold. This represents a downgrade from its previous Buy rating, effective from 20 Nov 2025. The downgrade reflects a more cautious stance given recent price declines and sector headwinds, despite the improved valuation metrics. The company’s market cap grade remains at 3, indicating a mid-sized market presence that may limit liquidity compared to larger peers.

Investors should weigh the improved valuation against the Hold rating and recent price weakness, considering the company’s operational strengths and sector dynamics before making allocation decisions.

Outlook and Investment Considerations

Federal-Mogul Goetze’s shift to a very attractive valuation grade, supported by a low P/E ratio, reasonable price-to-book value, and strong returns on capital, suggests that the stock is currently undervalued relative to its earnings and asset base. The company’s operational efficiency, as evidenced by its ROCE of 30.65%, further supports this positive view.

However, the recent downgrade to a Hold rating and the stock’s short-term price weakness indicate that investors should remain vigilant. The auto components sector faces cyclical pressures and competitive challenges that could impact near-term earnings growth. Additionally, the company’s market cap and liquidity profile may not suit all investor types.

Overall, Federal-Mogul Goetze presents a compelling valuation opportunity within the auto components space, particularly for investors prioritising value and operational quality. Monitoring sector trends and peer valuations will be essential to gauge the sustainability of this attractiveness.

Summary

In summary, Federal-Mogul Goetze (India) Ltd’s valuation parameters have improved markedly, with its P/E ratio of 14.09 and P/BV of 1.87 placing it in a very attractive category relative to peers. Strong operational metrics such as a 30.65% ROCE and a PEG ratio of 0.46 reinforce the stock’s investment appeal. Despite a recent Hold rating and some price volatility, the company’s medium-term returns have outpaced the Sensex, highlighting its potential as a value-oriented pick in the auto components sector.

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