Maximus International Ltd Valuation Shifts Signal Renewed Price Attractiveness

Valuation Metrics Show Positive Recalibration

Maximus International Ltd currently trades at a price of ₹9.87, down 1.99% from the previous close of ₹10.07. The stock’s 52-week range is relatively narrow, with a low of ₹9.65 and a high of ₹13.35, indicating limited volatility over the past year. The company’s price-to-earnings (P/E) ratio stands at 14.75, a figure that has contributed to its upgraded valuation grade from very attractive to attractive as of 1 February 2025.

Alongside the P/E ratio, the price-to-book value (P/BV) is 1.69, which remains modest and supportive of the improved valuation stance. Enterprise value to EBITDA (EV/EBITDA) is 11.73, reflecting a reasonable multiple relative to earnings before interest, taxes, depreciation and amortisation. These valuation multiples position Maximus International favourably when compared to its sector peers, many of whom exhibit significantly higher and more stretched ratios.

Peer Comparison Highlights Relative Attractiveness

Within the trading and distributors sector, Maximus International’s valuation stands out as comparatively attractive. For instance, Indiabulls trades at a P/E of 84.15 and an EV/EBITDA of 22.23, categorised as very expensive. Similarly, Cropster Agro and MIC Electronics exhibit P/E ratios exceeding 90 and 110 respectively, with EV/EBITDA multiples well above 50, signalling elevated risk and stretched valuations.

Conversely, India Motor Part, another peer, is rated very attractive with a P/E of 16.7 and EV/EBITDA of 21.1, slightly higher than Maximus but still within a reasonable range. Creative Newtech, rated attractive, trades at a P/E of 15.33 and EV/EBITDA of 15.27, again above Maximus’s multiples but not excessively so. This comparative framework underscores Maximus International’s relative valuation appeal within its industry cohort.

Financial Performance and Quality Metrics

Maximus International’s return on capital employed (ROCE) is 11.83%, while return on equity (ROE) is 12.52%, indicating moderate efficiency in generating returns from capital and shareholder equity. These figures, while not outstanding, are consistent with the company’s valuation upgrade and suggest a stable operational profile.

The company’s EV to capital employed ratio is 1.53, and EV to sales is 0.91, both reflecting conservative valuation multiples relative to asset base and revenue generation. The PEG ratio is reported as zero, which may indicate either flat earnings growth expectations or data unavailability, warranting cautious interpretation.

Stock Performance Versus Sensex Benchmark

Despite the improved valuation, Maximus International’s stock performance has lagged significantly behind the broader market. Year-to-date, the stock has declined by 9.78%, compared to a Sensex return of -1.16%. Over the past year, the stock has fallen 22.41%, while the Sensex gained 10.41%. The three-year and five-year returns are also deeply negative for Maximus, at -35.07% and -22.28% respectively, contrasting sharply with Sensex gains of 38.81% and 63.46% over the same periods.

This underperformance highlights the challenges faced by the company and the sector, despite the more attractive valuation multiples. Investors should weigh the valuation appeal against the company’s historical return profile and sector headwinds.

Mojo Score and Rating Update

MarketsMOJO assigns Maximus International a Mojo Score of 37.0, reflecting a cautious outlook. The Mojo Grade was downgraded from Hold to Sell on 1 February 2025, signalling concerns about the company’s near-term prospects despite the valuation improvement. The market capitalisation grade is 4, indicating a smaller market cap relative to larger peers, which may contribute to liquidity and volatility considerations.

The downgrade suggests that while valuation multiples have become more attractive, other fundamental or market factors weigh on the stock’s recommendation status. Investors should consider this rating in conjunction with valuation and performance metrics when making decisions.

Sector and Industry Context

The trading and distributors sector remains under pressure, with many companies exhibiting stretched valuations or risky financial profiles. Maximus International’s shift to an attractive valuation grade is a relative positive in this environment, but the sector’s overall challenges persist. Investors should monitor sector trends, including demand fluctuations, supply chain dynamics and regulatory developments, which could impact future earnings and valuation multiples.

Investment Implications and Outlook

Maximus International Ltd’s improved valuation metrics offer a more attractive entry point for investors seeking exposure to the trading and distributors sector. The P/E ratio of 14.75 and P/BV of 1.69 are reasonable relative to peers and historical levels, suggesting the stock is priced with a margin of safety.

However, the company’s sustained underperformance relative to the Sensex and the downgrade to a Sell rating by MarketsMOJO indicate caution. Investors should consider the company’s operational fundamentals, sector outlook and broader market conditions before committing capital.

Given the current valuation attractiveness, long-term investors with a higher risk tolerance may find value in accumulating shares, particularly if the company can stabilise earnings and improve returns on capital. Conversely, those prioritising momentum and quality metrics may prefer to explore alternatives within the sector or broader market.

Conclusion

Maximus International Ltd’s shift from a very attractive to an attractive valuation grade reflects a positive recalibration of price multiples amid a challenging market backdrop. While the stock offers relative value compared to expensive peers, its weak price performance and cautious Mojo Grade downgrade temper enthusiasm.

Investors should balance the improved valuation against fundamental risks and sector headwinds, employing a disciplined approach to portfolio allocation. Monitoring future earnings updates and sector developments will be critical to reassessing the stock’s investment merit over time.

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