Recent Price Movement and Market Context
Esab India’s stock has been under pressure for the past three consecutive days, accumulating a loss of 7.62% over this period. The intraday trading on 09-Jan saw the stock reach a high of Rs 6,008.55, marking a 2.17% gain at one point, but it ultimately succumbed to selling pressure, hitting a low of Rs 5,645, down 4.01% from the previous close. The weighted average price indicates that a larger volume of shares traded closer to the day’s low, signalling stronger selling interest as the session progressed.
Comparatively, the Electrodes & Welding Equipment sector, to which Esab India belongs, also experienced a decline of 3.28% on the same day, suggesting sector-wide headwinds may be contributing to the stock’s underperformance. Furthermore, Esab underperformed its sector by 0.55% today, indicating that the stock’s fall was slightly sharper than its peers.
Looking at broader returns, Esab India has lagged the benchmark Sensex over recent short-term periods. Over the past week, the stock declined 8.23%, significantly more than the Sensex’s 2.55% fall. Similarly, the one-month and year-to-date returns for Esab were -3.20% and -7.39% respectively, both underperforming the Sensex’s corresponding returns of -1.29% and -1.93%. Despite this, the stock has delivered strong long-term gains, with a five-year return of 217.66%, far outpacing the Sensex’s 71.32% over the same period.
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Technical Indicators and Trading Activity
From a technical perspective, Esab India’s share price remains above its 100-day and 200-day moving averages, which typically indicates a positive long-term trend. However, it is trading below its 5-day, 20-day, and 50-day moving averages, signalling short-term weakness and potential resistance levels. This divergence suggests that while the stock’s long-term outlook remains intact, recent trading sentiment has turned cautious.
Investor participation has increased, with delivery volumes on 08-Jan rising by 63.84% compared to the five-day average, reflecting heightened activity. Despite this, the increased volume has coincided with price declines, implying that selling pressure may be dominating. Liquidity remains adequate, with the stock capable of handling trade sizes of approximately Rs 0.06 crore based on recent average traded value.
Fundamental Strengths Supporting the Stock
Esab India boasts strong long-term fundamentals that underpin its valuation. The company has maintained an impressive average Return on Equity (ROE) of 42.90%, reflecting efficient capital utilisation. Operating profit has grown at a healthy annual rate of 27.84%, and the company carries virtually no debt, with an average Debt to Equity ratio of zero. These factors contribute to a solid financial foundation and support investor confidence in the stock’s long-term prospects.
Recent quarterly results for September 2025 further reinforce this strength, with net sales reaching a record Rs 381.55 crore and PBDIT hitting Rs 72.22 crore, both the highest recorded. The operating profit margin also improved to 18.93%, indicating effective cost management and operational efficiency. Promoters remain the majority shareholders, signalling stable ownership and strategic continuity.
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Valuation Concerns and Risks
Despite these positives, valuation concerns appear to be weighing on the stock. Esab India is trading at a very expensive multiple, with a Price to Book Value of 20.9, which is significantly higher than its peers’ historical averages. This premium valuation may be deterring some investors, especially given the stock’s modest 2.79% return over the past year compared to the Sensex’s 7.67% gain.
Moreover, the company’s PEG ratio stands at 5.8, indicating that the stock price may be overextended relative to its earnings growth rate of 8.2% over the last year. Such a high PEG ratio often signals that investors are paying a steep price for future growth expectations, which can lead to increased volatility and price corrections if growth fails to accelerate as anticipated.
In summary, the recent decline in Esab India’s share price on 09-Jan can be attributed to short-term profit-taking and sector-wide weakness, compounded by concerns over its lofty valuation. While the company’s strong fundamentals and record quarterly results provide a solid foundation, the premium price and technical indicators suggest caution among investors in the near term.
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