Par Drugs & Chemicals Ltd: Valuation Shifts Signal Changing Price Attractiveness

Valuation Metrics and Recent Changes

As of 1 February 2026, Par Drugs & Chemicals Ltd trades at ₹89.58, marginally down 0.12% from the previous close of ₹89.69. The stock’s 52-week range remains wide, with a high of ₹203.25 and a low of ₹81.01, indicating significant volatility over the past year. The company’s price-to-earnings (P/E) ratio currently stands at 11.38, a figure that has contributed to the downgrade in its valuation grade from attractive to fair.

Alongside the P/E, the price-to-book value (P/BV) ratio is at 1.11, signalling a valuation close to its book value, which is generally considered reasonable but less compelling than previous levels. Other enterprise value multiples such as EV/EBIT at 8.42 and EV/EBITDA at 6.13 further corroborate the fair valuation stance, reflecting moderate earnings and cash flow generation relative to enterprise value.

Comparative Peer Analysis

When compared with peers in the Chemicals & Petrochemicals sector, Par Drugs & Chemicals Ltd’s valuation appears more moderate. For instance, Stallion India is trading at a steep P/E of 45.34 and EV/EBITDA of 29.00, categorised as expensive. Conversely, companies like TGV Sraac and Indo Amines exhibit very attractive valuations with P/E ratios of 7.69 and 11.64 respectively, and lower EV/EBITDA multiples, suggesting better price points relative to earnings.

Other peers such as Oriental Aromatics and Dhunseri Ventures are rated attractive, with P/E ratios of 98.44 and 13.41 respectively, though Oriental Aromatics’ high P/E is offset by sector-specific growth expectations. Par Drugs & Chemicals Ltd’s fair valuation places it in the mid-range of the sector, neither significantly undervalued nor overvalued, which may temper investor enthusiasm amid broader market uncertainties.

Financial Performance and Returns Context

Par Drugs & Chemicals Ltd’s return profile over recent periods has been underwhelming relative to the benchmark Sensex. Year-to-date, the stock has declined by 11.53%, compared to a Sensex fall of 3.10%. Over the past year, the stock has suffered a steep 51.69% loss, while the Sensex gained 8.91%. Even over three years, the stock’s return of -44.92% contrasts sharply with the Sensex’s robust 43.47% gain.

However, the longer-term five-year return of 179.94% outpaces the Sensex’s 85.71%, indicating that despite recent setbacks, the company has delivered strong gains over a broader horizon. This mixed performance underscores the importance of valuation reassessment as recent price declines have brought multiples closer to fair value territory.

Profitability and Efficiency Metrics

On the profitability front, Par Drugs & Chemicals Ltd reports a return on capital employed (ROCE) of 22.22%, which is a healthy indicator of efficient capital utilisation. The return on equity (ROE) stands at 9.79%, a moderate figure that suggests reasonable shareholder returns but room for improvement compared to sector leaders.

These metrics support the notion that while the company maintains operational strength, the market’s tempered valuation reflects concerns over growth prospects and competitive pressures within the Chemicals & Petrochemicals sector.

Market Capitalisation and Mojo Score

The company holds a market capitalisation grade of 4, indicating a mid-sized market cap within its sector. Its Mojo Score, a proprietary measure of overall investment attractiveness, currently stands at 34.0, categorised as a Sell. This represents an upgrade from a previous Strong Sell rating as of 10 May 2025, signalling a slight improvement in outlook but still cautionary for investors.

The upgrade in Mojo Grade suggests that while valuation has become fairer, underlying risks and market headwinds continue to weigh on the stock’s appeal.

Valuation Outlook and Investor Considerations

With the shift from attractive to fair valuation, investors should carefully weigh the company’s current multiples against its historical performance and sector peers. The P/E of 11.38 is modest but no longer offers a significant margin of safety, especially given the stock’s recent underperformance and the Chemicals & Petrochemicals sector’s mixed outlook.

Price-to-book at 1.11 suggests the market values the company close to its net asset base, which may appeal to value-oriented investors but could deter growth-focused participants. Enterprise value multiples indicate reasonable earnings coverage but lack the compelling discount seen in more attractively valued peers.

Given the company’s solid ROCE and moderate ROE, operational fundamentals remain intact, but the market’s cautious stance reflects concerns about growth sustainability and competitive dynamics. Investors should monitor upcoming earnings releases and sector developments to gauge whether valuation can improve or if further downside risk persists.

Conclusion

Par Drugs & Chemicals Ltd’s valuation adjustment to fair from attractive marks a pivotal moment for investors. While the stock no longer appears undervalued, it remains competitively priced relative to many peers in the Chemicals & Petrochemicals sector. The company’s operational metrics provide some reassurance, but recent price weakness and a cautious Mojo Grade underline the need for prudence.

For investors seeking exposure to this sector, Par Drugs & Chemicals Ltd may warrant consideration as part of a diversified portfolio, but alternative stocks with stronger momentum or more compelling valuations could offer better risk-reward profiles in the current market environment.

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