Why Shaily Engineering Share Price is Falling

Shares of India's largest exporter of plastic components, Shaily Engineering Plastics, have logged double-digit negative returns so far in 2023.

The stock price has more than halved from its 52-week high of Rs 2,323, touched on 6 April 2022.

Interestingly, this is not the first time that the stock of Shaily engineering has disappointed investors.

In the last three years, the company has failed to produce profitable results. The share price also has tumbled by 52%.

This downward trend got further exacerbated in 2023. With just two and a half months into 2023, the share price has dropped 27%.

Let's find out why Shaily Engineering is under pressure.

Mirroring market volatility

Amid mixed global and domestic cues, the Sensex has lost over 4% of its value so far in 2023. The BSE midcap index has dipped 5% while the BSE smallcap index has lost over 6% of its value.

Among this, small-cap stocks have felt the most heat in 2023, with over 25 stocks delivering over 20% negative returns to investors.

This is because smallcaps are highly volatile. In a downturn, they get hit the hardest.

Shaily Engineering has been no exception to this falling trend. It has fallen over 25% in 2023.

Muted outlook due to inflation

Shaily Engineering Plastics posted a 9.5% Year-on-Year (YoY) decline in revenue at Rs 1.3 billion (bn) for the December 2022 quarter due to lower demand in the international market.

Given the current economic conditions and high inflation, customer sentiment in these markets have seen a substantial reduction in demand.

On the segments front, the home furnishing segment has seen a demand slowdown in customers, impacting volumes.

The toy segment of the company is facing a pressure on the margin front. The first few products that the company manufactured were on the higher end of the spectrum of toys and were seeing increasing pricing pressure.

Due to this company has stopped making further investments in the toys portfolio until it sees consistent buys from customers.

While on the healthcare front, the company's performance has been flat. It is almost in line with new projects for its existing healthcare portfolio.

Impacted by higher raw material costs, the company's net profit for December 2022 quarter came in at Rs 44.7 million (m), lower by 51.8% from Rs 92.8 m in December 2021 quarter.

Earnings before interest, tax, depreciation and amortisation (EBITDA) margin came in at Rs 181.9 m, down 25.1% YoY from Rs 242.9 m in December 2021.

This EBITDA was impacted due to slower offtake, which impacted lower utilisation levels leading to lower absorption of fixed costs.

In the earnings call, the management said, that it has seen a substantial reduction in offtake over the last two quarters and expects this volatility to continue for the next two quarters.

To improve this condition, the company plans to focus on adding customers and markets in segments where we are present to increase its utilisation levels and sweat the asset base that it has invested in and created over the last three to four years.

How Shaily Engineering shares have performed recently

Shaily Engineering shares have declined by more than 15% in the last month. In 2023, the stock is down more than 28%.

Shaily Engineering has a 52-week high of Rs 2,323 touched on 6 April 2022 and a 52-week quote of Rs 1,050 touched on 27 February 2023.

At the current price, Shaily Engineering trades at a PE multiple of 35.8 times and a price to book multiple of 2.7.

The stock's promoter holding stands at 40.5% of the company. Promoters have decreased their exposure to the stock. Promoter holding stood at 43.85% in September 2022, which now stands at 40.5%.

About Shaily Engineering

Shaily Engineering Plastics is engaged in the manufacturing of plastic products.

It specialises in manufacturing plastic components from high-performance and ultra-high-performance polymers. However, it now processes all commodity polymers in high volumes as well.

It offers a range of technological solutions for patient-centric and self-medication injection systems. It provides drug delivery devices, pens injections, auto-injector, dry powder inhalers and much more.

The company also manufactures a range of plastic and electronic toys in the global market.

Shaily Engineering produces components that are used in US defense applications, as well as high-end luxury car turbochargers.

Its manufacturing activities are carried out from plants located in Gujarat.

For more details, checkout the Shaily Engineering company fact sheet and quarterly results.

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