In This Article:
NCL Industries Limited (NSE:NCLIND), a ₹6.34b small-cap, operates in the basic materials industry, which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Basic material analysts are forecasting for the entire industry, a positive double-digit growth of 25.5% in the upcoming year , and a massive growth of 92.1% over the next couple of years. This rate is larger than the growth rate of the Indian stock market as a whole. In this article, I’ll take you through the sector growth expectations, as well as evaluate whether NCL Industries is lagging or leading in the industry.
View our latest analysis for NCL Industries
What’s the catalyst for NCL Industries’s sector growth?
The sector seems to be mature in terms of its industry life cycle, with highly competitive companies and inevitable consolidation. In the previous year, the industry saw growth in the teens, though still underperforming the wider Indian stock market. NCL Industries lags the pack with its negative growth rate of -36.9% over the past year, which indicates the company has been growing at a slower pace than its construction material peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 67.0% in the upcoming year. This future growth may make NCL Industries a more expensive stock relative to its peers.
Is NCL Industries and the sector relatively cheap?
The construction materials sector’s PE is currently hovering around 20.46x, in-line with the Indian stock market PE of 19.33x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 8.0% on equities compared to the market’s 9.3%. On the stock-level, NCL Industries is trading at a PE ratio of 17.21x, which is relatively in-line with the average construction material stock. In terms of returns, NCL Industries generated 8.5% in the past year, in-line with its industry average.
Next Steps:
NCL Industries’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If NCL Industries has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at NCL Industries’s fundamentals in order to build a holistic investment thesis.