Allcargo Logistics Ltd Downgraded to Sell Amid Mixed Technicals and Weak Financials

Technical Trends Spark Upgrade

The recent upgrade in Allcargo Logistics’ rating is largely attributable to improvements in its technical profile. The technical grade shifted from bearish to mildly bearish, signalling a tentative stabilisation in market sentiment. Weekly MACD readings have turned mildly bullish, while the monthly MACD remains bearish, indicating mixed momentum but a potential for recovery in the near term.

Further supporting this shift, the Relative Strength Index (RSI) is bullish on both weekly and monthly charts, suggesting that the stock is gaining positive momentum after a prolonged downtrend. Conversely, Bollinger Bands remain bearish on weekly and monthly timeframes, reflecting ongoing volatility and downward pressure. Daily moving averages continue to show bearish signals, while the KST indicator remains bearish across weekly and monthly periods. Dow Theory and On-Balance Volume (OBV) indicators show no clear trend, highlighting uncertainty in broader market participation.

Despite these mixed signals, the technical upgrade reflects a cautious optimism that the stock may be bottoming out after a steep decline, with the current price at ₹10.25, close to its 52-week low of ₹8.95 but far below its 52-week high of ₹42.89.

Financial Performance Remains Weak

Despite the technical upgrade, Allcargo Logistics’ financial trend continues to deteriorate. The company reported a sharp decline in net sales for Q2 FY25-26, with quarterly sales falling to ₹537 crores, down 76.1% compared to the previous four-quarter average. The net profit after tax (PAT) for the nine months ended September 2025 was a loss of ₹15.59 crores, reflecting a 34.41% decline year-on-year.

Cash and cash equivalents have also hit a low, standing at ₹138 crores for the half-year period, raising concerns about liquidity. Operating profit has contracted at an annualised rate of -39.45% over the past five years, signalling persistent operational challenges. These figures underscore the company’s struggle to generate sustainable earnings and cash flow.

Quality and Promoter Confidence Deteriorate

Investor confidence appears to be waning, as evidenced by a significant reduction in promoter holdings. Promoters have decreased their stake by 22.79% over the previous quarter, now holding 40.49% of the company. This sizeable divestment may indicate reduced faith in the company’s near-term prospects and strategic direction.

Quality metrics remain subdued, with the company’s return on capital employed (ROCE) at a low 1.5%, reflecting poor capital efficiency. While the debt to EBITDA ratio is a relatively comfortable 1.50 times, signalling manageable leverage, the overall financial health is undermined by weak profitability and cash flow generation.

Valuation Appears Attractive but Reflects Underperformance

From a valuation standpoint, Allcargo Logistics trades at a discount relative to its peers, with an enterprise value to capital employed ratio of 1.5. This suggests that the market is pricing in the company’s ongoing challenges and subdued growth outlook. The stock’s current price of ₹10.25 is significantly below its 52-week high of ₹42.89, reflecting a steep correction over the past year.

However, this discount is not without justification. The stock has underperformed the benchmark indices consistently, delivering a negative return of -75.50% over the last year compared to a 5.16% gain in the Sensex. Over three and five years, the stock’s returns have been -86.81% and -59.74% respectively, while the Sensex gained 35.67% and 74.40% over the same periods. This persistent underperformance highlights the structural issues facing the company.

Technical Outlook and Market Sentiment

The technical upgrade to a mildly bearish stance reflects a nuanced market view. While some momentum indicators such as weekly MACD and RSI have improved, others like Bollinger Bands and moving averages remain negative. This suggests that while the stock may be stabilising, it has yet to demonstrate a clear and sustained reversal.

Market participants should note the lack of a definitive trend in Dow Theory and OBV indicators, which implies that volume and price action have not yet aligned to confirm a bullish turnaround. The stock’s day change of -1.63% on 2 February 2026 further indicates ongoing volatility and investor caution.

Long-Term Growth Prospects Remain Challenging

Allcargo Logistics’ long-term growth trajectory is concerning. The company’s operating profit has declined at a compounded annual rate of -39.45% over five years, signalling structural issues in its core business. This is compounded by the significant underperformance relative to the BSE500 and Sensex indices over multiple time horizons.

Despite a low debt burden and attractive valuation metrics, the company’s weak profitability, declining sales, and reduced promoter confidence weigh heavily on its outlook. Investors should approach the stock with caution, recognising that the recent technical upgrade does not fully offset the fundamental challenges.

Summary of Ratings and Scores

MarketsMOJO currently assigns Allcargo Logistics a Mojo Score of 34.0, with a Mojo Grade of Sell, upgraded from Strong Sell as of 1 February 2026. The market capitalisation grade stands at 3, reflecting a mid-tier valuation relative to peers. This rating encapsulates the mixed signals from technical improvements against a backdrop of deteriorating financial health and weak long-term returns.

Investors should weigh the modest technical recovery against the company’s ongoing operational and financial difficulties before considering exposure to this stock.

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