Selan Exploration Technology Limited explores for and produces crude oil and natural gas in India. It holds rights to develop oilfields situated in Bakrol and Lohar, Gujarat; and Ognaj oil field and Karjisan gas field in Gujarat. Selan Exploration Technology Limited was incorporated in 1985 and is based in Gurugram, India.

India

Selan Exploration Technology Limited

Energy

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. On average, the company pays dividends annually. 

SELAN.NS reported revenue of INR 2 511mn in the last 12 months, up 83% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 172% from FY23 to INR 46.25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 33ppts over six months and grown 5ppts slower in the past month. At the same time, the stock's performance relative to its the peers from the same country and sector is different. It underperformed these peers by 34ppts over six months and grew 8ppts slower in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 45.3% in the last 12 months, up from 32.6% in FY23. 

Historically, SELAN.NS has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 28.0%, a growth from 18.9% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 13.9% in the last 12 months, an increase from 5.7% in FY23. 

Selan Exploration Technology Limited reported a return on equity (RoE) of 17.0% in the last 12 months, up from 6.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 14.6%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.7 in the past several years. This ratio implies a strong 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.

SELAN.NS has very poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day. Liquidity is very unstable and remains mildly favourable 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, robust profitability, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, excessive margin volatility.

In highly turbulent market conditions, SELAN.NS is volatile. In other words, the stock will fall much more than 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 large. 

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

Considering past and projected metrics, the stock is moderately 'expensive' compared to its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, overvalued on P/FCF. 

Selan Exploration Technology Limited

₹ 542

3

Selan Exploration Technology Limited

₹ 542

3

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Risk factor

Profitability factor

₹ 542

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