HEG Advanced Materials Limited

Industrials — Electrical Equipment & Parts · NSE

₹224.05−₹2.86 (−1.26%)

DalalBaazaar Score

54 / 100

🟡 Moderate

Verdict

NEUTRAL

Risk

Low

Driven by negative free cash flow, small-cap size, which brings sharper price swings.

In simple words: The business is earning a fairly low return on the money invested in it, with both sales and profits growing well. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:08 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

Company site ↗

The 60-second version of HEG Advanced Materials Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

HEG Advanced Materials Limited engages in the research and development of advanced battery materials, battery solutions. It manufactures custom machined components. The company also operates thermal power plants and a hydroelectric power facility.

IndustryElectrical Equipment & Parts

SectorIndustrials

Employees1,175

Annual revenue₹2,552 Cr

How does it make money?

Turns over ₹2,552 Cr a year. Of every ₹100 of sales, about ₹13 reaches shareholders as profit, with ₹23 left at the operating level before interest, tax and depreciation. Each of its 1,175 employees supports ₹2.17 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin23.3%

Net margin13.4%

Revenue / employee₹2.17 Cr

Who are its competitors?

The closest listed comparisons in its industry are SIEMENS LTD, ABB INDIA LIMITED, HAVELLS INDIA LIMITED. These are the companies its valuation and returns are measured against elsewhere in this report.

SIEMENS LTDP/E 88.8x · ROE 10.5%

ABB INDIA LIMITEDP/E 92.6x · ROE 19.1%

HAVELLS INDIA LIMITEDP/E 43.5x · ROE 17.1%

What is its competitive advantage?Little sign of one

Returns on capital of 8.8% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

ROCE8.8%

ROE7.2%

Peer median ROE17.1%

What is the outlook?

3 analysts covering the stock expect revenue to grow about 18.8% and earnings to grow about 37.8% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+18.8%

Est. earnings growth+37.8%

Analysts3

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +5% while net margin moved -39% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+5%

Margin effect-39%

DalalBaazaar Score

54/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue CAGR of only 1.6% — barely ahead of inflation
✗ Profit has declined at 13.8% a year

Quality vs. Valuation

Company Quality

49/ 100

Average

How good the business is, ignoring the share price entirely.

Valuation

84/ 100

Cheap

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

12.2x

3Y Median

28.9x

40 monthly readings · mean 42.9x · range 11.7x–110.3x

Sector Median

88.8x

median of 3 sector peers

🟢Current valuation is approximately 58% below its 3y median of 28.9x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟢Against its sector it trades 86% below the peer median of 88.8x.

vs. its own history

Cheap

28.9x median over 40 months · -58%

vs. sector peers

Cheap

88.8x median of 3 peers · -86%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

12.2x

P/B

0.91x

EV/EBITDA

13.7x

PEG

0.73

Dividend Yield

1.52%

What's Good / What's Bad

🟢 What's Going Well3

Valuation below its historical average
At 12.2x the stock trades 58% below its own median of 28.9x.
Very low debt
Debt/Equity of 0.17x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention4

Margins are compressing
EBITDA margin has slipped from 32.3% to 23.3% over 3 years.
Free cash flow is negative
The business is not currently covering its capital spending from operations.
Return on equity is falling
ROE has dropped from 12.4% to 7.2% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 16.1% to 8.8% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 2 high · 2 watch

🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🔴Significant margin compressionFinancial
EBITDA margin has fallen 9.0 points, from 32.3% to 23.3%.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹39 Cr in the latest year.
🟡Profit is decliningFinancial
Net profit is down 36% over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Priced below its own history
The stock trades 58% below its own median multiple. If the business performs as it has and simply re-rates back to normal, that gap is return on its own.
Cheaper than its peers
It trades 86% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Margins are being competed away
EBITDA margin has fallen from 32.3% to 23.3%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Growth barely outpaces inflation
Revenue compounding at 1.6% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
Returns on shareholder capital are falling
ROE has dropped from 12.4% to 7.2%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Small Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 21%✓ 23.3%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹39 Cr
Profit that never becomes cash eventually stops being profit.
3Revenue growth stays above 4% a year✗ 1.6% CAGR
Latest reported year was 10.4%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
4Debt / EBITDA stays below 2x✓ 1.3x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✓ 8.8%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

8 / 12 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✓ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Analyst consensus isn't majority-sell
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

6 good · 3 neutral · 2 weak

Market Cap

₹7,389 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

12.2x

Cheap

Cheap against the generic band

P/B Ratio

0.91x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹18.33

Profitable

Profitable on a per-share basis

ROE

7.2%

Weak

Weak capital efficiency

ROCE

8.8%

Moderate

Moderate return on the capital in the business

Debt/Equity

0.17x

Low

Conservative leverage

Revenue Growth (YoY)

10.4%

Healthy

Healthy top-line growth

Profit Growth (YoY)

16.8%

Healthy

Profits growing at a healthy clip

Dividend Yield

1.52%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

-₹39 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹224.05

P/E (Forward)

7.3x

Improving

Below the trailing multiple — the street expects earnings to grow into the price

Operating Margin

14.8%

Average

Average margins

Net Margin

13.6%

Good

Strong bottom-line conversion

Current Ratio

2.21

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.76

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

237.0 / 444.9

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

34.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹2,435 Cr	₹2,380 Cr	₹2,137 Cr	₹2,552 Cr	+1.6%
EBITDA	₹787 Cr	₹596 Cr	₹444 Cr	₹595 Cr	-8.9%
EBITDA Margin	32.3%	25.1%	20.8%	23.3%	—
PAT (Net Profit)	₹532 Cr	₹312 Cr	₹115 Cr	₹341 Cr	-13.8%
EPS	₹27.59	₹16.15	₹5.96	₹17.69	-13.8%
ROE	12.4%	7.0%	2.6%	7.2%	—
ROCE	16.1%	9.5%	4.3%	8.8%	—
Total Debt	₹743 Cr	₹623 Cr	₹588 Cr	₹796 Cr	+2.3%
Free Cash Flow	-₹366 Cr	₹241 Cr	₹97 Cr	-₹39 Cr	—

🟡 Revenue has been broadly flat over 3 years (1.6% a year).

🔴 EBITDA has shrunk at 8.9% a year over 3 years.

🔴 EBITDA Margin has fallen from 32.3% to 23.3% over 3 years (-9.0 pts).

🔴 PAT (Net Profit) has shrunk at 13.8% a year over 3 years.

🔴 EPS has shrunk at 13.8% a year over 3 years.

🔴 ROE has fallen from 12.4% to 7.2% over 3 years (-5.3 pts).

🔴 ROCE has fallen from 16.1% to 8.8% over 3 years (-7.2 pts).

🔴 Total Debt has grown at 2.3% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹6,166 Cr

Total Liabilities

₹1,408 Cr

Total Debt

₹796 Cr

Cash & Equivalents

₹41 Cr

Operating Cash Flow

₹213 Cr

Capex

-₹253 Cr

Shareholding (proxy)

Institutional Holding

8.9%

Insider Holding

72.6%

Corporate Actions

Dividend Rate

₹3.4

Ex-Dividend Date

22 Jul 2026

Analyst Consensus

Recommendations

3 Buy · 0 Hold · 0 Sell

Target Price (Mean)

₹710

+216.9% vs CMP

Target Range

₹630 – ₹750

Peer Comparison

Company	P/E	ROE
SIEMENS LTD	88.8x	10.5%
ABB INDIA LIMITED	92.6x	19.1%
HAVELLS INDIA LIMITED	43.5x	17.1%

Recent News

1 mixed5 general

HEG Advanced Materials Ltd. Share Price Live Today

CNBC TV18, 16 Oct

HEG ADVANCED MATERIALS LTD Fact Sheet

Equitymaster, 16 Oct

India Battery Storage Boom Puts HEG Advanced Materials Stock In Focus

Simply Wall Street, 12 Oct

HEG Advanced Materials Gets ₹127.35 Crore Order; Shares Rise 0.79%

HDFC Sky, 01 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

HEG Advanced Materials Limited Actuals & Estimates (NSE:HEGAM)

TradingView, 03 Oct

MP GST drops ₹282.34 crore proceedings against HEG Advanced Materials

scanx.trade, 15 Oct

Watch Items

Trading very close to its 52-week low — worth checking whether this reflects a temporary setback or a structural problem.
Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🟡Business QualityAdequate10.3/20

🟢Financial HealthStrong14.5/20

🔴GrowthWeak5/20

🟡ProfitabilityModerate6.9/15

🟢ValuationAttractive13.2/15

🟡RiskModerate4.5/10

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 2 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 21%23.3%
✗Free cash flow remains positive-₹39 Cr
✗Revenue growth stays above 4% a year1.6% CAGR
✓Debt / EBITDA stays below 2x1.3x
✓ROCE stays above 8%8.8%