Race Eco Chain Ltd. engages in trading and marketing of fabrics and yarns. Its product range includes fabrics for bedding, window dressing, decorative, pillows and accents, table linen, kitchen linen, and other home furnishing fabrics. The company operates under the following segments: Miscellaneous Old Economy Products, Recycle Division, and Restore Division. The company was founded on November 22, 1999 and is headquartered in Ghaziabad, India.

India

Race Eco Chain Limited

Industrials

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

RACE.BO reported revenue of INR 5 383mn in the last 12 months, up 22% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 157% from FY23 to INR 3.93.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 34ppts and its growth decelerated by 7ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 2.4% in the last 12 months, up from 1.5% in FY23. 

Historically, RACE.BO has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 1.2%, a growth from 0.6% in FY23. 

Race Eco Chain Limited reported a return on equity (RoE) of 13.8% in the last 12 months, up from 12.2% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 6.8% in the last 12 months, an increase from 4.3% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 12.9%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.3 in the past several years. This ratio implies a average shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

RACE.BO has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity may be unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth and low margin volatility, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, and poor working capital management.

In highly turbulent market conditions, RACE.BO is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, RACE.BO is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the mild intraday volatility of the instrument. 

From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, overvalued on P/FCF. 

Race Eco Chain Limited

₹ 268

3

Race Eco Chain Limited

₹ 268

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 268

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