Supreme Petrochem Ltd Valuation Shifts Signal Changing Market Sentiment

Valuation Grade Downgrade and Market Reaction

On 3 November 2025, Supreme Petrochem Ltd’s valuation grade was downgraded from 'Attractive' to 'Fair' by MarketsMOJO, accompanied by a downgrade in its overall Mojo Grade from Hold to Sell. This shift signals a reassessment of the company’s price attractiveness, driven primarily by its elevated price-to-earnings (P/E) and price-to-book value (P/BV) ratios compared to historical levels and peer averages.

Currently, Supreme Petrochem trades at a P/E ratio of 43.42 and a P/BV of 5.31. These multiples, while still below some sector heavyweights, represent a premium relative to the company’s own historical valuation and suggest that the market is pricing in robust growth expectations. However, the elevated multiples also raise concerns about potential overvaluation risks, especially given the petrochemical sector’s cyclical nature.

Comparative Valuation Analysis Within the Petrochemicals Sector

When benchmarked against key peers, Supreme Petrochem’s valuation appears more moderate but less compelling than before. For instance, Navin Fluorine International trades at a very expensive P/E of 72.39 and an EV/EBITDA of 41.67, while Himadri Speciality Chemical is also classified as very expensive with a P/E of 32.98 and EV/EBITDA of 24.60. Deepak Nitrite, another significant player, is deemed expensive with a P/E of 42.4 and EV/EBITDA of 26.68.

Supreme Petrochem’s EV/EBITDA ratio stands at 28.05, positioning it in the mid-range of the sector spectrum. This suggests that while the company is not the most expensive, its valuation premium has narrowed relative to peers, reflecting a more cautious investor stance.

Financial Performance and Return Metrics

Supreme Petrochem’s return on capital employed (ROCE) is a healthy 20.05%, and return on equity (ROE) stands at 12.23%, indicating efficient capital utilisation and reasonable profitability. The dividend yield of 1.59% adds a modest income component for investors, though it is not a primary attraction given the company’s growth orientation.

From a price performance perspective, the stock has shown strong long-term returns, with a 10-year return of 1,046.25% compared to the Sensex’s 245.70%. Over five years, the stock has outperformed the benchmark by delivering a 231.00% return versus the Sensex’s 66.63%. However, more recent returns have been mixed, with a 1-year return of 2.47% lagging the Sensex’s 8.49%, and a year-to-date decline of 2.72% slightly worse than the Sensex’s 1.74% fall.

Price Movement and Market Capitalisation

Supreme Petrochem’s current market price stands at ₹627.00, up 7.45% on the day from a previous close of ₹583.55. The stock has traded within a 52-week range of ₹460.95 to ₹981.65, indicating significant volatility and a wide valuation band. The recent price appreciation reflects renewed investor interest, possibly driven by sector tailwinds and company-specific developments.

The company’s market capitalisation grade remains modest at 3, consistent with its small-cap status within the petrochemicals sector. This positioning often entails higher volatility but also greater growth potential compared to larger, more established peers.

Sector Outlook and Valuation Context

The petrochemicals sector continues to face a complex environment characterised by fluctuating raw material costs, regulatory pressures, and evolving demand patterns. Against this backdrop, valuation multiples across the sector have generally expanded, driven by expectations of sustained earnings growth and margin improvement.

Supreme Petrochem’s shift from an attractive to a fair valuation grade reflects a recalibration of these expectations. While the company’s fundamentals remain solid, the premium multiples now demand consistent execution and growth to justify current prices. Investors should weigh these factors carefully, considering both the company’s strong historical returns and the risks inherent in elevated valuations.

Investment Considerations and Outlook

Investors analysing Supreme Petrochem should consider the company’s valuation in the context of its growth prospects and sector dynamics. The current P/E of 43.42, while lower than some peers, is elevated relative to the company’s historical averages and implies high growth expectations. The EV/EBITDA multiple of 28.05 further supports this view, suggesting that the market is pricing in strong operational performance ahead.

On the positive side, Supreme Petrochem’s robust ROCE of 20.05% and consistent dividend yield of 1.59% provide a degree of financial stability and shareholder return. The company’s long-term stock performance, with a 10-year return exceeding 1,000%, underscores its capacity to generate value over extended periods.

However, the downgrade to a Sell Mojo Grade and the shift in valuation grade to fair indicate caution. Investors should monitor quarterly earnings, margin trends, and sector developments closely to assess whether the company can sustain its premium valuation. The petrochemical industry’s sensitivity to global economic cycles and raw material price swings remains a key risk factor.

Conclusion

Supreme Petrochem Ltd’s recent valuation adjustment from attractive to fair reflects a nuanced market reassessment amid sector-wide valuation expansions and company-specific fundamentals. While the stock continues to offer long-term growth potential supported by strong returns and operational metrics, the elevated multiples warrant a cautious approach. Investors should balance the company’s historical outperformance against the risks of stretched valuations and sector cyclicality when making investment decisions.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →