Future Outlook Of The Basic Materials Industry And MOIL Limited (NSE:MOIL)

MOIL Limited (NSEI:MOIL), a ₹49.77B small-cap, is a metals and mining operating in an industry which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Furthermore, the basic materials sector can be affected by shifts in the housing market, as many produced raw materials are components of construction projects. For example, if new housing development slows, the demand for metal products may also decrease. Basic material analysts are forecasting for the entire industry, a strong double-digit growth of 13.02% in the upcoming year . Is now the right time to pick up some shares in metals and mining companies? Today, I will analyse the industry outlook, and also determine whether MOIL is a laggard or leader relative to its basic materials sector peers. See our latest analysis for MOIL

What’s the catalyst for MOIL's sector growth?

As a whole, the basic materials sector seems like it has reached maturity in its life cycle. Companies appear to be highly competitive and consolidation seems to be a natural trend. There are plenty of emerging trends to deal with across the board including the reduction of waste, raw material inflation, and innovation in global supply chain management. Over the past year, the industry saw growth in the twenties, beating the Indian market growth of 14.72%. MOIL leads the pack with its impressive earnings growth of 97.67% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with MOIL poised to deliver a 58.47% growth over the next couple of years compared to the industry's 13.02%. This growth may make MOIL a more expensive stock relative to its peers.

Is MOIL and the sector relatively cheap?

The metals and mining industry is trading at a PE ratio of 18.39x, in-line with the Indian stock market PE of 23.19x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 9.19% on equities compared to the market’s 9.68%. On the stock-level, MOIL is trading at a PE ratio of 18.39x, which is relatively in-line with the average metals and mining stock. In terms of returns, MOIL generated 10.96% in the past year, which is 1.77% over the metals and mining sector.

Next Steps:

MOIL’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If MOIL has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at MOIL's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has MOIL's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of MOIL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.