Axel Polymers Ltd Upgraded to Sell on Technical and Valuation Improvements

Technical Trends Shift to Mildly Bullish

The primary catalyst for the upgrade lies in the technical analysis of Axel Polymers’ stock price movements. The technical grade has improved from a sideways trend to a mildly bullish stance, indicating a potential positive momentum shift. On a weekly basis, the Moving Average Convergence Divergence (MACD) remains bearish, but the monthly MACD has turned mildly bullish, suggesting that longer-term momentum is beginning to favour buyers.

Other technical indicators present a mixed but improving picture. The Relative Strength Index (RSI) shows no clear signal on both weekly and monthly charts, while Bollinger Bands remain mildly bearish, reflecting some volatility and caution. However, daily moving averages have turned mildly bullish, supporting the recent upward price movement. The Know Sure Thing (KST) indicator is bearish on a weekly basis but mildly bullish monthly, and Dow Theory analysis shows no clear weekly trend but a mildly bullish monthly trend.

These technical nuances have contributed to a 3.31% gain in the stock price on the day of the upgrade, with the current price at ₹44.95, up from the previous close of ₹43.51. The stock’s 52-week range remains wide, with a high of ₹60.00 and a low of ₹27.72, indicating significant volatility but also room for upside.

Valuation Grade Improves to Attractive

Alongside technical improvements, Axel Polymers’ valuation grade has been upgraded from very attractive to attractive. The company currently trades at a price-to-earnings (PE) ratio of 32.53, which, while elevated, is reasonable relative to its sector peers. For context, Apollo Pipes trades at a PE of 43.01, and Rajoo Engineers at 19.22, placing Axel Polymers in a middle ground valuation band.

Other valuation multiples reinforce this assessment. The enterprise value to EBITDA ratio stands at 14.62, and the enterprise value to capital employed ratio is a modest 1.77, signalling efficient use of capital relative to market valuation. The price-to-book value ratio is 3.25, and the PEG ratio is notably low at 0.13, indicating that the stock’s price growth is not excessively outpacing earnings growth. Return on capital employed (ROCE) is 10.70%, and return on equity (ROE) is 9.98%, both reflecting moderate profitability.

These valuation metrics suggest that Axel Polymers is trading at a discount compared to some peers and historical averages, offering a more attractive entry point for investors willing to look beyond short-term financial setbacks.

Financial Trend Remains Challenging

Despite the upgrade in technical and valuation grades, Axel Polymers’ financial trend remains a concern. The company reported negative financial performance in the second quarter of fiscal year 2025-26, with net sales declining by 60.04% to ₹22.42 crores over the latest six months. Profit after tax (PAT) also fell sharply by 60.04% to ₹0.05 crores in the same period.

Further, the company’s debt servicing ability is weak, with a high debt to EBITDA ratio of 6.89 times, indicating significant leverage risk. The debtors turnover ratio is low at 5.30 times, suggesting slower collection cycles and potential liquidity pressures. Promoter confidence appears to be waning as well, with a 0.9% reduction in promoter stake over the previous quarter, now standing at 60.26% ownership.

These factors contribute to Axel Polymers’ overall Mojo Score of 36.0 and a Mojo Grade of Sell, reflecting cautious sentiment despite the recent upgrade from Strong Sell. The company’s long-term fundamental strength is weak, with an average ROCE of 9.23%, below the threshold typically favoured by investors seeking robust capital efficiency.

Stock Performance Versus Market Benchmarks

Axel Polymers’ stock performance has underwhelmed relative to broader market indices. Over the past year, the stock has delivered a negative return of -5.88%, while the Sensex gained 9.85% and the BSE500 index rose 12.60%. Over longer horizons, however, the stock has shown impressive gains, with a five-year return of 228.10% and a ten-year return of 491.45%, significantly outperforming the Sensex’s 62.34% and 264.02% returns respectively.

This divergence highlights the stock’s volatility and cyclical nature, with recent underperformance weighed down by weak quarterly results and market headwinds. Nevertheless, the long-term growth trajectory remains positive, supported by the company’s strategic positioning in the plastic products industrial sector.

Summary and Outlook

Axel Polymers Ltd’s upgrade from Strong Sell to Sell reflects a cautious but positive shift in its investment profile. The technical indicators suggest emerging bullish momentum, while valuation metrics have become more attractive relative to peers and historical levels. However, the company’s financial performance remains under pressure, with significant declines in sales and profits, high leverage, and reduced promoter confidence.

Investors should weigh these mixed signals carefully. The stock’s long-term returns have been impressive, but near-term risks persist. The improved technical and valuation outlook may offer a window for selective accumulation, particularly for those with a higher risk tolerance and a long-term investment horizon. Monitoring upcoming quarterly results and promoter activity will be crucial to reassessing the stock’s trajectory.

Overall, Axel Polymers remains a Sell-rated stock with a Mojo Score of 36.0, reflecting the need for caution despite recent positive developments.

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