Supreme Petrochem Ltd Valuation Shifts Signal Price Attractiveness Challenges

Valuation Metrics Reflect Elevated Price Levels

As of 10 Feb 2026, Supreme Petrochem’s P/E ratio stands at 44.19, a significant premium over its historical averages and many industry benchmarks. This figure places the company firmly in the ‘expensive’ category, a shift from its previous ‘fair’ valuation status. The price-to-book value ratio has also climbed to 5.40, underscoring the market’s willingness to pay a substantial premium over the company’s net asset value. These valuation multiples are notably higher than the sector median, indicating that the stock is trading at a premium relative to its intrinsic book value and earnings potential.

Other valuation indicators such as the enterprise value to EBIT (EV/EBIT) at 35.67 and enterprise value to EBITDA (EV/EBITDA) at 28.56 further corroborate the expensive valuation stance. These multiples suggest that investors are pricing in robust future earnings growth, yet the current price levels may limit upside potential given the risk of multiple contraction.

Comparative Analysis with Industry Peers

When benchmarked against key peers in the petrochemicals sector, Supreme Petrochem’s valuation appears stretched but not the most expensive. For instance, Navin Fluorine International trades at a P/E of 76.42 and an EV/EBITDA of 43.97, categorised as ‘very expensive’. Similarly, Acutaas Chemicals and Aether Industries also command very high multiples, with P/E ratios of 57.11 and 58.68 respectively.

In contrast, companies like Aarti Industries, with a P/E of 45.76 and EV/EBITDA of 19.14, are considered fairly valued, offering a more balanced risk-reward profile. This peer comparison highlights that while Supreme Petrochem is expensive, it is not an outlier in a sector where elevated valuations have become commonplace amid strong earnings growth narratives.

Financial Performance and Returns Contextualise Valuation

Supreme Petrochem’s return on capital employed (ROCE) of 20.05% and return on equity (ROE) of 12.23% indicate solid operational efficiency and profitability. These metrics justify some premium in valuation, reflecting the company’s ability to generate returns above its cost of capital. However, the PEG ratio remains at 0.00, signalling either a lack of meaningful earnings growth projections or data unavailability, which adds uncertainty to the valuation premium.

The company’s dividend yield of 1.57% is modest, suggesting that investors are primarily banking on capital appreciation rather than income generation. This yield is below the average for many petrochemical peers, which may weigh on income-focused investors.

Stock Price Movement and Market Capitalisation

Supreme Petrochem’s current market price is ₹638.05, up 7.06% on the day from a previous close of ₹595.95. The stock has traded within a 52-week range of ₹460.95 to ₹981.65, indicating significant volatility and a wide trading band. Despite recent gains, the stock remains well below its 52-week high, suggesting room for recovery but also caution given the stretched valuation.

Its market capitalisation grade is rated 3, reflecting a mid-tier market cap status within the petrochemicals sector. This positioning influences liquidity and investor interest, with mid-cap stocks often experiencing sharper price swings compared to large caps.

Returns Analysis: Outperformance Over Long Term but Recent Weakness

Examining Supreme Petrochem’s stock returns relative to the Sensex reveals a mixed picture. Over the past week and month, the stock has outperformed the benchmark significantly, delivering returns of 9.34% and 11.46% respectively, compared to Sensex gains of 2.94% and 0.59%. This short-term momentum reflects renewed investor interest and possible technical buying.

However, on a year-to-date basis, the stock has declined by 1.00%, slightly underperforming the Sensex’s 1.36% fall. Over the one-year horizon, Supreme Petrochem has lagged the broader market, with a negative return of 5.47% against the Sensex’s 7.97% gain. This underperformance may be attributed to valuation concerns and sector-specific headwinds.

Longer-term returns paint a more favourable picture. Over three years, the stock has delivered a robust 63.75% return, comfortably outpacing the Sensex’s 38.25%. The five-year and ten-year returns are even more impressive, at 248.57% and 1076.13% respectively, dwarfing the Sensex’s 63.78% and 249.97% gains. These figures underscore the company’s strong growth trajectory and value creation over the long haul.

Mojo Grade Downgrade Reflects Elevated Risk

On 3 Nov 2025, MarketsMOJO downgraded Supreme Petrochem’s Mojo Grade from Hold to Sell, reflecting concerns over the company’s stretched valuation and the risk of multiple contraction. The current Mojo Score of 33.0 aligns with a Sell recommendation, signalling that the stock may be overvalued relative to its fundamentals and peer group.

This downgrade is consistent with the shift in valuation grade from fair to expensive, highlighting the need for investors to exercise caution. While the company’s operational metrics remain solid, the premium pricing limits the margin of safety and increases vulnerability to market corrections or earnings disappointments.

Sector and Market Context

The petrochemicals sector has witnessed elevated valuations across the board, driven by strong demand, supply constraints, and favourable macroeconomic factors. Many peers trade at very expensive multiples, reflecting investor optimism about future earnings growth. However, this environment also raises the risk of valuation resets should growth expectations moderate or input costs rise.

Supreme Petrochem’s valuation positioning relative to its peers suggests it is priced for continued strong performance but with less exuberance than some of the highest-valued companies in the sector. Investors should weigh the company’s solid returns and operational efficiency against the risks posed by its premium multiples.

Investor Takeaway: Valuation Discipline Remains Key

Supreme Petrochem Ltd’s recent valuation shift to expensive territory warrants a cautious approach from investors. While the company boasts strong returns on capital and a history of outperformance relative to the Sensex, the elevated P/E and P/BV ratios suggest limited upside from current levels without further earnings acceleration.

Investors should monitor the company’s earnings trajectory closely, alongside sector dynamics and broader market conditions. The risk of multiple contraction is heightened in an environment where many petrochemical stocks trade at lofty valuations. Diversification and valuation discipline remain essential to managing risk in this segment.

In summary, Supreme Petrochem’s valuation parameters have deteriorated relative to historical norms and peers, prompting a downgrade in its investment grade. While operational fundamentals remain robust, the premium pricing reduces the margin of safety and calls for prudent portfolio positioning.

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