Bhilwara Spinners Ltd. : Undervalued relative to peers, but don’t ignore the other factors

Bhilwara Spinners Ltd. relative valuation is now UNDERVALUED. It was previously rated NEUTRAL, and has a fundamental analysis score of 72.

Our analysis is based on comparing Bhilwara Spinners Ltd. with the following peers – United Textiles Limited, KG Petrochem Ltd., Sri Ramakrishna Mills Coimbatore Ltd. and Nakoda Limited (521188-IN, 531609-IN, 521178-IN and 521030-IN).

Relative Valuation

Bhilwara Spinners Ltd.’s price of INR 7.30 is lower than CapitalCube’s implied price of INR 9.08. CapitalCube believes that at these levels, Bhilwara Spinners Ltd. is undervalued and has upside potential. Over the last 52 week period, the stock has fluctuated between INR 7 and INR 15.70.

Relative Valuation

Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • Bhilwara Spinners Limited trades at a lower Price/Book multiple (0.44) than its peer median (0.83).
  • We classify 514272-IN as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • 514272-IN‘s relatively high profit margins are burdened by relative asset inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • 514272-IN‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s median gross margin and relatively high pre-tax margins suggest non-differentiated product portfolio but with tight cost control relative to peers.
  • While 514272-IN‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • 514272-IN currently does not have any debt.

Investment Outlook

Bhilwara Spinners Ltd. has a fundamental score of 72 and has a relative valuation of UNDERVALUED.

Bhilwara Spinners Ltd. is on the top left quadrant of the CapitalCube Value – Price Matrix. We classify this space a ‘Value Play’. Here, Bhilwara Spinners Ltd. is potentially undervalued, since it trades below its CapitalCube Implied Price of 9.08. At the same time, Bhilwara Spinners Ltd. is also fundamentally strong with a score of 72. This is a classic value stock definition.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

514272-IN has a Harvesting profile relative to its peers.

We classify 514272-IN as Harvesting because of the market’s low expectations of growth (P/E of 2.81 compared to peer median of 6.24) despite its relatively high returns (ROE of 16.87% compared to the peer median ROE of 11.67%).

The company trades at a lower Price/Book multiple of 0.44 compared to its peer median of 0.83.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

514272-IN has maintained its Harvesting profile from the recent year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Bhilwara Spinners Ltd. engages in the manufacturing and exporting of textile yarn. Its brands include BSL and Mayur Suitings. The company was founded on June 7, 1980 and is headquartered in Bhilwara, India.

Disclaimer

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