Khaitan Chemical (KHAICHEM)

FairStock Score: 23/100 — RISKY

Score breakdown: P/E: 3/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Low P/E of 7.64 and PEG of 0.16 suggest cheapness if earnings are sustainable
• Strong reported profit growth of 62.87% and sales growth of 33.69%
• High promoter holding of 72.65% aligns owner-manager interests
• Piotroski F-Score of 7/9 indicates decent near-term financial health

Concerns

• ROCE of only 2.48% signals weak operational return on capital employed
• ROE of 35.80% appears heavily aided by debt/equity of 1.07
• No dividend yield, so shareholder returns depend entirely on price appreciation and uncertain growth
• Stock has fallen sharply from ₹135.80 to ₹62.66, reflecting cyclicality and market skepticism

AI Analysis

At ₹62.66, the market is pricing Khaitan Chemical at only 7.64 times trailing earnings and 2.96 times book. A low P/E and a PEG ratio of 0.16 immediately catch my eye. Profit has grown 62.87 percent on a sales increase of 33.69 percent, and the latest quarter shows ₹266 crore revenue and ₹20 crore net profit. Those are strong numbers, but I have learned to be suspicious when a cheap-looking fertilizer stock also shows a ROCE of just 2.48 percent. That tiny operating return on capital tells me the 35.80 percent ROE owes much more to financial engineering than to an economic moat. With debt/equity at 1.07, the company is using leverage to boost equity returns, and in a commodity business that is a fragile foundation. The Piotroski F-score of 7/9 suggests recent financial health, and 72.65 percent promoter holding is a positive alignment indicator. On the other hand, there is no dividend, so my only return must come from higher prices or further earnings growth. The share price has already fallen from a 52-week high of ₹135.80 to ₹62.66; that decline is a reminder that fertilizer earnings and market sentiment are cyclical. Book value is only ₹21.17, so I am paying almost three times net worth despite the low earnings multiple. Benjamin Graham would check the balance sheet and the earnings record; the figures here are mixed. A 2.48 percent ROCE is too close to a subpar return on capital. I would not call this a wonderful business. It may be an interesting, leverage-driven cyclical play if the current profit growth persists and working capital is managed well, but I need evidence that operating margins and capital efficiency improve before treating it as a long-term holding.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer