Nikhil Adhesives is a small-cap, low-margin chemicals/adhesives company with moderate but improving profitability and manageable leverage. On fundamentals alone, it looks like a reasonable but not “outstanding quality” bet; suitability depends heavily on your risk appetite and time horizon rather than it being a clear yes/no buy.

Below is a concise ratio-based view (standalone, FY ending March 2025, i.e. “Mar 25”).

1. Key financial ratios (FY25 – latest full year) (moneycontrol.com)

- Scale & earnings

- Revenue from operations: ~₹584 crore (₹126.95 per share × ~4.6 crore shares)

- Net profit: ~₹154 crore; EPS (basic): ₹3.67

- Net profit margin: 2.88% (vs 2.34% in FY24; 2.29% in FY23)

- Returns

- ROE (Return on Equity): 12.99%

- ROCE (Return on Capital Employed): 18.33%

- ROA: 5.21%

- Leverage & liquidity

- Debt-to-equity: 0.43x (FY25; 0.45x in FY24)

- Current ratio: 1.44x (improving from 1.37x in FY24, 1.26x in FY23)

- Quick ratio: 0.88x

- Profitability/margins trend

- EBITDA margin: 6.26% (FY25; 5.31% in FY24; ~5.1% in FY23)

- Net margin: 2.88% (FY25; 2.35% in FY24; 2.29% in FY23)

- Gross margin has moved up to ~21% vs sub‑18% earlier. (stockanalysis.com)

- Growth

- Revenue growth (YoY): +3.6% in FY25, after -24.1% in FY24 and -8.6% in FY23 – effectively flat to negative over 3 years. (stockanalysis.com)

- EPS growth FY25 vs FY24: +27.4% (from ₹2.88 to ₹3.67), after two weak years. (stockanalysis.com)

- Valuation (approximate, as of 24 Mar 2026, 13:45 IST)

- BSE price: ~₹68; not listed on NSE. (moneycontrol.com)

- Trailing EPS FY25: ₹3.67 → P/E ≈ 18.5x at ₹68

- Book value per share FY25: ₹28.18 → P/B ≈ 2.4x at ₹68

- Historical EV/EBITDA FY25 (year-end): ~12.0x (based on then market cap/EV, not today’s price). (moneycontrol.com)

Liquidity note: 30‑day average volume ~36,000 shares; at ~₹68 this is ≈₹25 lakh/day – relatively low liquidity for meaningful position sizing. (moneycontrol.com)

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2. How these ratios look, in plain language

Positives

1. Decent return ratios for a small-cap commodity‑linked player

- ROE ~13% and ROCE ~18% are reasonable, suggesting it is earning more than its cost of capital but is not in the elite 20–25%+ bracket of high‑quality compounders. (moneycontrol.com)

2. Margins and profitability improving from a low base

- EBITDA margin has improved from ~5.3% to ~6.3%; net margin from ~2.3% to ~2.9%. This indicates better cost control and/or raw‑material tailwinds. (moneycontrol.com)

3. Leverage seems manageable

- Debt/equity at ~0.43x with a current ratio of 1.44x is acceptable for a manufacturing small‑cap; not debt‑free, but not stretched. (moneycontrol.com)

4. Valuation is not extreme

- A trailing P/E around 18–19x and P/B ~2.4x are moderate compared with larger adhesive names (which often trade at much higher multiples), though those peers generally have much stronger brands and margins.

Concerns / Red flags

1. Weak revenue trajectory over 3 years

- Revenue has shrunk over FY22–FY24 and only mildly recovered in FY25 (+3.6% after a 24% drop). This raises questions about volume growth, product mix, or pricing power. (stockanalysis.com)

2. Structurally low margins

- Even after improvement, net margin is below 3% and EBITDA margin ~6%; this leaves limited cushion against raw‑material inflation or down‑cycles. (moneycontrol.com)

3. Small-cap, single‑business risk

- Market cap is only ~₹310–320 crore at current price (approximate), which makes it sensitive to sector cycles, a few key customers, and any execution missteps. Liquidity is also limited. (stockanalysis.com)

4. Cyclical / input‑cost exposure

- Adhesive/chemical manufacturers are heavily exposed to petrochemical‑based inputs; past volatility in revenues and margins suggests earnings can swing with raw‑material and demand cycles.

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3. Is it “good to buy” at current levels?

This is not investment advice but an example of how one could interpret the numbers:

- From a fundamentals-only lens:

- The company shows acceptable but not outstanding quality – mid‑teens ROCE/low‑teens ROE, thin but improving margins, and manageable leverage.

- Growth has been inconsistent, with recent EPS recovery driven more by margins/costs than by strong top‑line expansion.

- At ~18–19x trailing earnings and ~2.4x book, it does not look very expensive, but also not “dirt cheap” given the low margins, revenue volatility and small size.

- For a relatively aggressive, small-cap oriented investor (example profile):

- If one is comfortable with:

- low‑margin, cyclical earnings,

- modest liquidity,

- and the expectation that management can sustain/improve ROCE and restart volume growth,

- then, on numbers alone, Nikhil Adhesives could be considered a medium‑risk, valuation‑reasonable small‑cap idea to study deeper (promoters, capex plans, client mix, etc.).

- For a conservative, quality‑first investor (example profile):

- If the preference is for:

- strong brand moats,

- consistently high ROE/ROCE (>20%),

- double‑digit and steady revenue growth,

- then these ratios and the growth history likely do not qualify it as a “must‑own”; one might prefer higher‑quality names even at richer valuations.

In summary, based purely on current ratios and recent history, Nikhil Adhesives does not look fundamentally broken or extremely overvalued, but it is also not a clear high‑quality compounder. Whether it is “good to buy” depends on:

- your risk tolerance for small‑cap chemicals,

- your comfort with thin margins and volatile growth,

- and your holding period (this kind of business generally needs a multi‑year horizon to play out).

Before taking any decision, it is advisable to:

- read the latest annual report and credit rating reports for qualitative insights (capacity additions, customer concentration, management commentary), and

- review the last 2–3 quarterly results to ensure FY26 numbers are not deteriorating post FY25.

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