Haryana Leather Chemicals Ltd Valuation Shifts to Very Expensive Amidst Market Underperformance

Valuation Metrics and Their Evolution

Recent data reveals that Haryana Leather Chemicals Ltd’s P/E ratio has settled at 13.15, a level that places it in the 'very expensive' category according to MarketsMOJO’s grading system. This is a notable increase from its previous 'expensive' rating, reflecting a shift in investor sentiment or earnings expectations. The price-to-book value (P/BV) ratio remains relatively low at 0.63, which might suggest undervaluation on a book basis; however, this contrasts with the overall valuation grade, indicating that earnings multiples are driving the premium.

Other valuation multiples such as EV to EBIT (8.71) and EV to EBITDA (6.15) also provide insight into the company’s enterprise value relative to its earnings before interest, taxes, depreciation, and amortisation. These multiples are moderate but do not offset the elevated P/E ratio, reinforcing the 'very expensive' classification. The EV to capital employed ratio is particularly low at 0.55, and EV to sales stands at 0.40, which may reflect asset-light operations or subdued sales growth.

Comparative Analysis with Peers

When compared with peers in the commodity chemicals industry, Haryana Leather Chemicals Ltd’s valuation appears stretched. For instance, Stallion India, another player in the sector, is rated as 'expensive' with a P/E of 45.34 and EV to EBITDA of 29.00, indicating a much higher valuation but possibly justified by growth prospects or market positioning. Conversely, companies such as TGV Sraac and Indo Amines are rated 'very attractive' with P/E ratios of 7.69 and 11.64 respectively, and significantly lower EV to EBITDA multiples, suggesting more reasonable valuations relative to earnings.

Other peers like Oriental Aromatics and Dhunseri Ventures are classified as 'attractive' with P/E ratios of 98.44 and 13.41, respectively, though the former’s high P/E is likely driven by growth expectations. The presence of 'very expensive' peers such as Indo Borax & Chemicals (P/E 20.12) and Titan Biotech (P/E 33.37) indicates a spectrum of valuation approaches within the sector, but Haryana Leather Chemicals Ltd’s current rating signals caution for investors.

Financial Performance and Returns Context

Haryana Leather Chemicals Ltd’s recent market performance has been lacklustre, with a one-week return of -1.74% and a one-month decline of -12.37%, both underperforming the Sensex’s respective gains of 0.90% and -2.84%. Year-to-date, the stock has fallen by 9.38%, while the Sensex has gained 3.46%. Over a one-year horizon, the stock’s return is deeply negative at -21.88%, contrasting sharply with the Sensex’s 7.18% rise.

Longer-term returns tell a more nuanced story. Over three years, Haryana Leather Chemicals Ltd has delivered a positive 9.82% return, though this lags the Sensex’s robust 38.27% gain. Over five years, the stock outperforms the Sensex with a 93.47% return compared to 77.74%, and over ten years, it has gained 69.73% while the Sensex surged 230.79%. These figures suggest that while the company has delivered solid long-term gains, recent performance has been disappointing, which may contribute to the valuation disconnect.

Quality and Profitability Metrics

Examining profitability, Haryana Leather Chemicals Ltd’s return on capital employed (ROCE) stands at 6.36%, while return on equity (ROE) is 4.75%. These figures are modest and may not justify the elevated valuation multiples. The dividend yield of 1.79% offers some income cushion but is unlikely to be a primary attraction for investors given the valuation concerns.

The company’s PEG ratio is reported as 0.00, which may indicate either a lack of earnings growth or data unavailability. This absence of growth metrics further complicates the valuation narrative, as investors typically seek a premium valuation justified by strong growth prospects.

Market Capitalisation and Trading Activity

Haryana Leather Chemicals Ltd holds a market capitalisation grade of 4, reflecting its mid-cap status within the commodity chemicals sector. The stock’s current price is ₹56.01, marginally down from the previous close of ₹56.07. The 52-week trading range spans from ₹52.00 to ₹88.80, indicating significant volatility and a recent downtrend from the highs. Today’s intraday range between ₹55.05 and ₹58.50 suggests some buying interest near current levels but no decisive upward momentum.

Implications for Investors

The shift in valuation grade from expensive to very expensive, coupled with underwhelming recent returns and moderate profitability, signals caution for investors considering Haryana Leather Chemicals Ltd. While the stock has demonstrated strong long-term returns, the current premium valuation multiples may not be supported by near-term earnings growth or operational improvements.

Investors should weigh the company’s valuation against its sector peers, many of which offer more attractive multiples and potentially better growth prospects. The modest dividend yield and low ROE further temper the investment case, suggesting that the stock may be vulnerable to downside if earnings disappoint or market sentiment shifts.

Outlook and Market Sentiment

MarketsMOJO’s latest assessment assigns Haryana Leather Chemicals Ltd a Mojo Score of 16.0 and a Mojo Grade of Strong Sell, upgraded from Sell on 21 Nov 2025. This downgrade in sentiment reflects concerns over valuation and earnings prospects. The company’s current standing in the commodity chemicals sector is challenged by peers with more compelling valuations and growth trajectories.

Given the stock’s recent underperformance relative to the Sensex and the broader sector, investors may prefer to allocate capital to companies with stronger momentum and more attractive valuation profiles. The company’s moderate profitability and subdued growth indicators do not currently support a premium valuation, suggesting that the stock may face headwinds in the near term.

In conclusion, while Haryana Leather Chemicals Ltd has delivered respectable long-term returns, its recent valuation shift to very expensive, combined with weak relative performance and modest profitability, warrants a cautious approach. Investors should carefully consider alternative opportunities within the commodity chemicals sector and beyond before committing to this stock.

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