Valuation Metrics Indicate Undervaluation
NCL Industries trades at a price-to-earnings (PE) ratio of approximately 15.6, which is significantly lower than many of its peers in the cement industry. For context, leading competitors such as UltraTech Cement and Shree Cement command PE ratios well above 40, with some exceeding 50. This relatively modest PE ratio suggests that the market currently prices NCL Industries at a discount relative to its earnings potential.
Further supporting this undervaluation thesis is the company’s price-to-book (P/B) ratio, which stands just below 1.0. A P/B ratio near unity often indicates that the stock is trading close to its net asset value, implying limited premium for growth or intangible assets. This contrasts with other industry players whose P/B ratios are considerably higher, reflecting market expectations of stronger growth or brand value.
Enterprise value multiples also reinforce this perspective. NCL Industries’ EV to EBITDA ratio is around 8.1, markedly lower than the sector heavyweights that typically trade above 10 or even 20 times EBITDA. This suggests that investors are paying less for each unit of operating cash flow generated by NCL Industries compared to its competitors.
Perfect timing to enter! This Small Cap from IT - Software just turned profitable with growth momentum clearly building up. Get in before the broader market notices!
- - New profitability achieved
- - Growth momentum building
- - Under-the-radar entry
Profitability and Returns: Modest but Stable
While valuation multiples suggest undervaluation, it is important to consider the company’s profitability metrics. NCL Industries reports a return on capital employed (ROCE) of 7.4% and a return on equity (ROE) of 6.4%. These figures are moderate and indicate steady but unspectacular profitability. Investors may view these returns as adequate given the company’s valuation, but they also highlight that NCL Industries is not currently delivering the high returns seen in some of its more expensive peers.
The dividend yield of 1.54% adds a modest income component for shareholders, which can be attractive in a sector known for stable cash flows. However, this yield is not particularly high, suggesting that the company is likely reinvesting earnings to support future growth rather than returning substantial cash to investors.
Market Performance and Price Trends
Examining recent stock price movements, NCL Industries has experienced a decline over the past year, with a 12.2% drop compared to a 5.3% gain in the Sensex index. Year-to-date, the stock is down over 10%, while the broader market has advanced nearly 9%. This underperformance may reflect investor concerns about the company’s growth prospects or sector-specific challenges.
Despite this, the stock’s 52-week low of ₹180.10 and high of ₹239.20 indicate a reasonable trading range, with the current price near ₹195.20 suggesting a discount to recent highs. This price level, combined with the attractive valuation metrics, may present a buying opportunity for value-oriented investors.
Peer Comparison Highlights Relative Value
When compared with peers, NCL Industries stands out as one of the most attractively valued stocks in the cement sector. While companies like UltraTech Cement and Shree Cement are classified as very expensive, NCL Industries is rated very attractive based on its valuation multiples. Even ACC, another very attractive stock, trades at a lower PE ratio but with a slightly higher EV to EBITDA multiple.
This relative valuation advantage suggests that NCL Industries could be undervalued by the market, especially if it can improve profitability or capital efficiency over time. Investors seeking exposure to the cement sector at a reasonable price may find NCL Industries a compelling option.
NCL Industries or something better? Our SwitchER feature analyzes this Microcap Cement & Cement Products stock and recommends superior alternatives based on fundamentals, momentum, and value!
- - SwitchER analysis complete
- - Superior alternatives found
- - Multi-parameter evaluation
Conclusion: NCL Industries Appears Undervalued with Potential Upside
In summary, NCL Industries exhibits valuation characteristics that suggest it is undervalued relative to its peers in the cement industry. Its low PE ratio, price-to-book value near one, and modest EV multiples indicate the market is pricing the stock conservatively. Although profitability metrics such as ROCE and ROE are moderate, they are consistent with the company’s valuation grade, which recently improved to very attractive.
Investors should weigh the company’s stable but unspectacular returns against its attractive valuation and the potential for price appreciation if operational performance improves. The stock’s recent underperformance relative to the Sensex may offer a contrarian opportunity for value investors willing to look beyond short-term market fluctuations.
Overall, NCL Industries is best characterised as undervalued in the current market context, making it a stock worthy of consideration for those seeking exposure to the cement sector at a reasonable price point.
Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →
