Codex

Everest Industries trades at ₹335 – below book value – because ROCE has collapsed from 18% to under 1% in four years while interest costs have overtaken operating profit. The stock will rerate only when operating margin recovers above 4% with positive free cash flow. Until then, the sub-book valuation is deserved, not a mispricing.

Valuation Snapshot

The stock has fallen 55% from its 52-week high of ₹750 and sits just 18% above its low. P/B at 0.92x and TTM EPS deeply negative (-₹29.55) mean the market is pricing this as a turnaround or liquidation candidate, not a going concern compounder.

Revenue and Earnings Power

EPS peaked at ₹39.56 in FY2019 and has trended down for six years. The FY2025 loss of ₹2.28 is the first annual net loss in this dataset. Mid-cycle earning power was around ₹25-35 per share; the current price of ₹335 would imply 10-13x mid-cycle P/E if the company can return to those levels.

Quarterly Deterioration

Q3 FY2026 (Oct-Dec 2025) was the worst quarter on record: operating loss of ₹19 Cr, PBT loss of ₹48 Cr, and EPS of -₹23.95. Revenue fell 24% YoY. Both Building Products and Steel Buildings segments reported revenue declines. An exceptional charge of ₹13.3 Cr (gratuity under new Labour Codes) deepened the loss further.

The seasonal pattern is clear – Q2 and Q3 (monsoon and post-monsoon) consistently produce losses, while Q1 and Q4 show modest profits. But the magnitude of losses is worsening each cycle.

Cash Generation

Cumulative FCF over the last four years (FY2022-FY2025) is negative ₹294 Cr. The business has destroyed cash over a full cycle. Only FY2021 (post-pandemic restocking) and FY2018 produced meaningful free cash flow. This pattern is typical of a commodity-sensitive business with high working-capital intensity and limited pricing power.

Balance Sheet and Leverage

Working Capital Efficiency

Inventory days have stayed stubbornly above 140 for eight years, peaking at 194 in FY2023. Debtor days jumped to 33 in FY2025, the highest level in a decade. Payable days fell from 92 (FY2021) to 59 (FY2025), meaning the company is paying suppliers faster than it collects from customers. The cash conversion cycle at 128 days is 90% above the FY2021 low of 68 days.

Interest Coverage Collapse

Interest coverage collapsed from 28x (FY2021) to 1.25x (FY2025). Below 2x, the business has no margin of safety on debt service. On a TTM basis (operating loss of ₹2 Cr vs ₹28 Cr interest), coverage is negative. This is the metric the market is watching most closely.

Peer Comparison

Ramco Industries is the closest peer and trades at a lower P/B (0.53x) despite far better ROCE (3.6%) and 11% operating margins. This tells you the building materials sector overall is cheap, but Everest's premium P/B over Ramco is unjustified given inferior returns. Visaka Industries, with comparable market cap and similar product exposure, has a lower P/B (0.71x) with better operating margins. Everest is the most expensive stock on a returns-adjusted basis in its peer set.

Margin Comparison vs Peers

The gap between Everest and peers has widened, not narrowed. Ramco's margin stabilized at 10-11% while Everest's slid from 9% to 2%. Visaka recovered from 6% to 7% while Everest continued declining. This is not an industry problem – it is an Everest problem.

Shareholder Base

Shareholder count has fallen from 21,255 to 18,929 (down 11%) as retail investors exit. This is consistent with weak results driving capitulation. Dividend of ₹2.50 per share (declared Sep 2025) provides 0.75% yield, offering minimal support.

What The Numbers Say

The numbers confirm that Everest Industries is in a genuine profitability crisis, not a temporary blip. Operating income has fallen for five consecutive years while debt has tripled. Cash conversion has been net negative over the most recent four-year period. The sub-book valuation is not a contrarian opportunity absent clear evidence of margin recovery.

The numbers contradict any thesis that asset value provides a floor. Book value is eroding (reserves fell from ₹582 Cr to ₹561 Cr through Q2 FY2026), and the balance sheet is absorbing the very cash that would otherwise support equity value.

Next quarter, watch two things: whether Q4 FY2026 operating profit covers the quarter's interest expense (it needs to exceed ₹7 Cr), and whether the cash conversion cycle moves below 110 days. Both improving simultaneously would be the first genuine sign of a turnaround.