ETERNAL - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 2.9
| Stock Code | ETERNAL | Market Cap | 2,84,114 Cr. | Current Price | 294 ₹ | High / Low | 368 ₹ |
| Stock P/E | 112 | Book Value | 37.1 ₹ | Dividend Yield | 0.00 % | ROCE | 7.34 % |
| ROE | 6.55 % | Face Value | 1.00 ₹ | DMA 50 | 286 ₹ | DMA 200 | 285 ₹ |
| Chg in FII Hold | -2.80 % | Chg in DII Hold | 2.57 % | PAT Qtr | 657 Cr. | PAT Prev Qtr | 691 Cr. |
| RSI | 58.2 | MACD | -2.30 | Volume | 6,68,70,199 | Avg Vol 1Wk | 5,41,12,396 |
| Low price | 190 ₹ | High price | 368 ₹ | PEG Ratio | 2.23 | Debt to equity | 0.01 |
| 52w Index | 58.5 % | Qtr Profit Var | 33.0 % | EPS | 2.62 ₹ | Industry PE | 46.9 |
📊 Analysis: ETERNAL shows weak fundamentals for long-term investment despite its large market cap. ROCE (7.34%) and ROE (6.55%) are low, indicating poor capital efficiency. EPS of 2.62 ₹ is modest relative to valuation. Debt-to-equity at 0.01 reflects a virtually debt-free balance sheet, which is positive. However, the P/E ratio (112) is far above the industry average (46.9), suggesting significant overvaluation. Dividend yield is 0%, offering no income support. PEG ratio of 2.23 indicates growth is priced expensively. Technically, the stock is trading near DMA 50 (286 ₹) and DMA 200 (285 ₹), with RSI at 58.2 (neutral) and MACD slightly negative, suggesting consolidation.
💰 Ideal Entry Zone: 240 ₹ – 270 ₹ (below DMA levels, offering margin of safety and better valuation comfort).
📈 Exit / Holding Strategy: If already holding, consider exiting on rallies near 350–368 ₹ (52-week high zone). Long-term holding is not advisable unless ROE and ROCE improve significantly. Current metrics suggest weak growth potential, so capital may be better deployed in stronger peers.
Positive
- Debt-to-equity ratio of 0.01 shows virtually debt-free operations.
- Quarterly PAT remains strong (657 Cr.), showing scale of operations.
- DII holdings increased (+2.57%), reflecting domestic institutional support.
Limitation
- Extremely high P/E ratio (112) compared to industry average (46.9).
- Low ROCE (7.34%) and ROE (6.55%), showing poor capital efficiency.
- Dividend yield of 0% offers no shareholder returns.
- PEG ratio of 2.23 suggests growth is priced expensively.
Company Negative News
- Decline in FII holdings (-2.80%), showing reduced foreign investor confidence.
- Sequential PAT decline (657 Cr. vs 691 Cr.), showing earnings pressure.
Company Positive News
- Quarterly profit variation +33.0%, showing strong YoY growth.
- DII holdings increased, reflecting domestic institutional confidence.
Industry
- Industry PE at 46.9, far below company’s valuation, highlighting overvaluation.
- Sector benefits from scale and demand, but efficiency metrics are critical for sustainability.
Conclusion
⚠️ ETERNAL is not a strong candidate for long-term investment due to poor ROE, ROCE, and unsustainable valuation. Entry only makes sense near deep value zones (240–270 ₹) for short-term recovery trades. Long-term investors should avoid or exit on rallies unless fundamentals improve.
Selva, would you like me to extend this into a peer benchmarking overlay with sector peers (like Adani Enterprises, Reliance, or other large-cap diversified players) so you can compare relative strength and margin-of-safety positioning for your basket rotation strategy?