Shish Industries Ltd Upgrades Quality Grade Amidst Mixed Market Performance

Quality Grade Upgrade and Its Implications

On 5 December 2025, Shish Industries Ltd’s quality grade was upgraded from a sell to a hold rating, with the Mojo Score rising to 51.0. This upgrade signals a recognition of improved business fundamentals, particularly in profitability and capital efficiency. The company now stands out positively within the Plastic Products - Industrial sector, where many peers remain at average or below average quality grades.

Shish Industries’ quality grade improvement is underpinned by a robust five-year compound annual growth rate (CAGR) in EBIT of 56.94%, significantly outpacing its sales growth of 32.16% over the same period. This indicates enhanced operational leverage and margin expansion, a favourable sign for investors seeking companies with improving profitability dynamics.

Return on Equity and Capital Employed: Signs of Strength

The company’s average return on equity (ROE) stands at 16.47%, while its return on capital employed (ROCE) is 10.89%. Both metrics have contributed to the upgrade in quality grade, reflecting efficient utilisation of shareholder funds and capital investments. These returns are notably higher than many industry peers such as Apollo Pipes and Rajoo Engineers, which maintain average quality grades.

ROE above 15% is generally considered a hallmark of a quality business, and Shish Industries’ figure suggests it is generating solid returns for shareholders. Meanwhile, the ROCE figure above 10% indicates the company is effectively deploying capital to generate operating profits, a critical factor for sustaining long-term growth.

Debt Levels and Interest Coverage: A Balanced Financial Profile

Shish Industries maintains a conservative debt profile, with an average net debt to equity ratio of 0.27 and a debt to EBITDA ratio of 1.91. These levels suggest manageable leverage, reducing financial risk and providing flexibility for future investments or downturns. The company’s EBIT to interest coverage ratio of 4.82 further confirms its ability to comfortably service debt obligations, an important consideration for creditworthiness and investor confidence.

Low pledged shares at 0.00% and modest institutional holding of 1.23% indicate limited promoter encumbrance and relatively low institutional interest, which may present opportunities for increased investor participation as fundamentals improve.

Sales to Capital Employed and Taxation

The sales to capital employed ratio averages 1.27, signalling moderate asset turnover. While this is not exceptionally high, it aligns with the company’s capital-intensive industrial plastic products business. The tax ratio of 36.91% is consistent with prevailing corporate tax rates, reflecting stable tax obligations without unusual volatility.

Stock Price Performance and Market Context

Despite the fundamental improvements, Shish Industries’ stock price has faced headwinds recently. The current price of ₹12.27 is down 3.00% on the day and has declined 33.32% year-to-date, underperforming the Sensex’s modest 3.04% decline over the same period. The stock’s 52-week high of ₹19.14 contrasts sharply with its recent lows near ₹7.10, reflecting significant volatility.

Longer-term returns, however, remain impressive. Over five years, the stock has delivered a staggering 1,143.54% return, vastly outperforming the Sensex’s 60.30% gain. This exceptional performance highlights the company’s ability to generate shareholder wealth over the medium to long term, despite short-term market pressures.

Comparative Industry Positioning

Within the Plastic Products - Industrial sector, Shish Industries now ranks among the few companies with a good quality grade, alongside Premier Polyfilm. Most competitors, including Apollo Pipes, Rajoo Engineers, and Tarsons Products, remain at average quality levels, while Ester Industries and Commercial Synbags are rated below average. This relative strength may attract investors seeking quality exposure in the sector.

However, institutional ownership remains low at 1.23%, suggesting limited analyst coverage and investor awareness. This could change if the company continues to demonstrate consistent earnings growth and capital efficiency.

Consistency and Dividend Policy

While the company’s sales and EBIT growth rates over five years are robust, the absence of a reported dividend payout ratio indicates that Shish Industries may be reinvesting earnings to fuel growth rather than returning cash to shareholders. This strategy can be favourable for growth-oriented investors but may deter income-focused participants.

Consistency in earnings and cash flow generation will be critical for sustaining the upgraded quality grade. Investors should monitor quarterly results for signs of stabilising sales growth and margin sustainability.

Outlook and Investor Considerations

Shish Industries Ltd’s upgrade to a good quality grade reflects meaningful improvements in profitability, capital efficiency, and financial health. The company’s strong EBIT growth and solid returns on equity and capital employed position it well for sustainable value creation. However, investors should remain cautious about recent sales growth moderation and stock price volatility.

With a manageable debt profile and comfortable interest coverage, the company has the financial flexibility to navigate market uncertainties. The low institutional holding and zero pledged shares suggest potential for increased investor interest as the company’s fundamentals continue to strengthen.

Overall, Shish Industries presents a compelling case for investors seeking quality exposure in the industrial plastics sector, particularly those with a medium to long-term investment horizon. Monitoring quarterly earnings consistency and market sentiment will be key to assessing whether the upgraded quality grade translates into sustained stock performance.

Summary of Key Financial Metrics

Five-year averages:

• Sales Growth: 32.16%
• EBIT Growth: 56.94%
• EBIT to Interest Coverage: 4.82 times
• Debt to EBITDA: 1.91 times
• Net Debt to Equity: 0.27
• Sales to Capital Employed: 1.27
• Tax Ratio: 36.91%
• Return on Capital Employed (ROCE): 10.89%
• Return on Equity (ROE): 16.47%

These figures underpin the company’s upgraded quality grade and improved Mojo Score of 51.0, now rated as a Hold by MarketsMOJO.

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