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Power Mech Projects Limited (NSE:POWERMECH), a ₹13.67b small-cap, operates in the engineering and construction (E&C) industry, which is expected to benefit from higher gross domestic product, high consumer confidence, and upbeat private sector investments. Capital goods analysts are forecasting for the entire industry, a strong double-digit growth of 24.7% in the upcoming year , and a whopping growth of 72.1% over the next couple of years. the growth rate of the Indian stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Power Mech Projects is lagging or leading in the industry.
View our latest analysis for Power Mech Projects
What’s the catalyst for Power Mech Projects’s sector growth?
The E&C industry in Indian faces growing competition from players in emerging markets, who are beginning to expand outward and seek to take market share from established global players. In the previous year, the industry saw growth in the forties, beating the Indian market growth of 21.8%. Power Mech Projects lags the pack with its lower growth rate of 29.9% over the past year, which indicates the company has been growing at a slower pace than its E&C peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 28.4% in the upcoming year. This future growth may make Power Mech Projects a more expensive stock relative to its peers.
Is Power Mech Projects and the sector relatively cheap?
The E&C industry is trading at a PE ratio of 18.15x, in-line with the Indian stock market PE of 19.33x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 8.4% on equities compared to the market’s 9.3%. On the stock-level, Power Mech Projects is trading at a PE ratio of 15.97x, which is relatively in-line with the average E&C stock. In terms of returns, Power Mech Projects generated 14.0% in the past year, which is 5.7% over the E&C sector.
Next Steps:
Power Mech Projects’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 Power Mech Projects 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 Power Mech Projects’s fundamentals in order to build a holistic investment thesis.