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Best waste management and recycling stocks in India

21 February 20246 mins read by Angel One
This article delves into the performance and potential of waste management and recycling companies in the market, focusing on key financial metrics and trends.
Best waste management and recycling stocks in India
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Waste management and recycling companies play a crucial role in promoting environmental sustainability by efficiently managing and repurposing waste materials. In recent years, these companies have garnered attention, driven by increasing urbanisation, environmental consciousness, and stricter regulations from investors and stakeholders alike due to their contribution to mitigating environmental concerns and their potential for financial growth. The market is expected to reach Rs 1.5 lakh crore by 2025, presenting lucrative opportunities for investors.

Waste Management and Recycling Companies – Key Metrics

Sr. No Company Name CMP Rs. Mar Cap (Rs crore) P/E 1Y stock returns (%) Debt / Eq ROE % ROCE % ROIC %
1 Eco Recycling Ltd. 492.00 949.40 78.37 286.43 0.75 15.24 15.49 22
2 Urban Enviro Waste Management Ltd. 412.50 178.62 85.46 217.31 2.66 20.64 14.67 9.08
3 VA Tech Wabag Ltd. 717.10 4,459.73 14.72 126.19 0.1 8.57 7.63 12.92
4 Antony Waste Handling Cell Ltd. 541.90 1,538.03 22.54 114.55 0.07 24.76 32.74 24.06
5 EMS Ltd. 508.10 2,821.53 26.27 80.82 0.11 26.21 33.77 24.56
6 Baheti Recycling Industries Ltd. 192.00 199.08 37.71 75.46 0.03 22.91
7 Ion Exchange (India) Ltd. 499.80 7,330.47 35.85 52.43 1.1 46.34 17.21 15.38
8 Nupur Recyclers Ltd. 127.15 581.84 71.65 19.76 0.17 3.11 19.53 23.64

Stock Performance Analysis

Among the listed companies, several have exhibited impressive stock returns over the past year, indicating strong market performance and investor confidence. Companies like Eco Recycling Ltd and Urban Enviro Waste Management Ltd. have recorded significant gains, reflecting robust business strategies and market demand for sustainable solutions.

Valuation Metrics

While analysing valuation metrics, it’s noteworthy that certain stocks are trading below the industry price-to-earnings (P/E) ratio, suggesting potential undervaluation. Investors often seek out such opportunities, anticipating an increase in valuation as these stocks catch up with industry norms. Va tech Wabag Ltd, Antony Waste and Baheti Recycling Industries Ltd are such companies trading at a lower P/E ratio, indicating potential for upward revaluation.

Financial Health Indicators

Metrics such as Return on Equity (ROE), Return on Capital Employed (ROCE), and Return on Invested Capital (ROIC) provide insights into the financial health and efficiency of these companies. Ion Exchange (India) Ltd. stands out with impressive ROE, ROCE, and ROIC figures, highlighting its effective utilisation of capital and strong profitability.

Sales and Profit Growth

Examining sales and profit growth numbers, companies like Antony Waste Handling Cell Ltd. and EMS Ltd. have demonstrated consistent growth in both metrics over the past three years. This sustained performance underscores their competitive strength and market positioning in the waste management sector.

Debt Management

A crucial aspect of financial health is debt management, as reflected in the debt-to-equity (D/E) ratio. Companies with lower debt levels relative to equity are generally considered less risky and more financially stable. Nupur Recyclers Ltd. emerges as a favourable option with a low D/E ratio, indicating prudent debt management practices.

Small-Cap Performance vs. Market Capitalisation

Interestingly, some smaller market cap companies have outperformed their larger counterparts, defying conventional expectations. This phenomenon underscores the agility and growth potential of smaller players in the waste management and recycling sector, leveraging niche market opportunities and innovative solutions.

Conclusion

In conclusion, waste management and recycling companies represent a compelling investment opportunity, driven by increasing awareness of environmental sustainability and regulatory initiatives. Investors can capitalize on undervalued stocks trading below industry benchmarks while considering key financial metrics such as ROE, ROCE, and sales growth. Moreover, the performance of smaller market cap companies underscores the dynamism and potential of this sector in fostering both financial returns and environmental stewardship.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

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