Rating Overview and Context
On 08 January 2026, MarketsMOJO revised Azad Engineering Ltd’s rating from 'Hold' to 'Sell', reflecting a significant change in the company’s overall assessment. The Mojo Score dropped by 21 points, moving from 57 to 36, signalling a more cautious stance towards the stock. This rating encapsulates a comprehensive evaluation of the company’s quality, valuation, financial trend, and technical indicators.
It is important to note that while the rating change occurred earlier this month, the data and performance figures referenced here are current as of 31 January 2026, ensuring investors receive the latest insights into the stock’s standing.
Quality Assessment
Azad Engineering Ltd’s quality grade is classified as average. The company’s return on equity (ROE) stands at 7.5%, which indicates moderate profitability relative to shareholder equity. While this level of ROE suggests the company is generating reasonable returns, it does not place Azad Engineering among the top performers in its sector. Investors should consider that an average quality grade reflects a stable but unspectacular operational efficiency and earnings quality.
Valuation Considerations
The valuation grade for Azad Engineering Ltd is deemed very expensive. Currently, the stock trades at a price-to-book (P/B) ratio of 6.5, which is significantly higher than typical valuations within the heavy electrical equipment sector. This elevated valuation implies that the market is pricing in strong future growth or other positive expectations. However, the company’s PEG ratio of 2.2 suggests that earnings growth may not fully justify the premium valuation. Investors should be cautious, as paying a high valuation multiple increases risk if growth expectations are not met.
Financial Trend Analysis
Despite the expensive valuation, the financial grade is positive. The latest data shows that Azad Engineering Ltd’s profits have increased by 51% over the past year, signalling robust earnings growth. However, this growth has not translated into strong stock price performance, as the stock has delivered a negative return of -1.51% over the last 12 months. This divergence between earnings growth and share price performance may reflect broader market concerns or sector-specific challenges.
Technical Outlook
The technical grade for Azad Engineering Ltd is bearish. The stock’s recent price movements indicate downward momentum, with a one-month return of -8.71% and a three-month return of -12.99%. Even though the stock gained 3.58% on the latest trading day and 6.20% over the past week, the overall trend remains negative. This bearish technical stance suggests that short-term market sentiment is cautious, and investors may face resistance in the near term.
Performance Relative to Benchmarks
Azad Engineering Ltd has underperformed key market indices such as the BSE500 over multiple time frames, including the last three years, one year, and three months. This underperformance highlights challenges in maintaining competitive returns relative to the broader market. The stock’s year-to-date return is -10.49%, further emphasising the cautious outlook from investors.
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What the 'Sell' Rating Means for Investors
The 'Sell' rating assigned to Azad Engineering Ltd by MarketsMOJO indicates that the stock is currently expected to underperform relative to the broader market or its sector peers. This recommendation is based on a combination of factors: an average quality profile, very expensive valuation, positive but insufficient financial trends to offset valuation concerns, and bearish technical signals.
For investors, this rating suggests caution. While the company’s earnings growth is encouraging, the high valuation and negative price momentum imply limited upside potential in the near term. Investors may want to consider alternative opportunities with more attractive valuations or stronger technical setups.
Summary of Key Metrics as of 31 January 2026
Azad Engineering Ltd’s market capitalisation remains in the smallcap category within the heavy electrical equipment sector. The stock’s one-day gain of 3.58% and one-week gain of 6.20% contrast with longer-term negative returns, including a one-month loss of 8.71% and a three-month loss of 12.99%. The year-to-date return stands at -10.49%, while the one-year return is slightly negative at -1.51%.
The company’s ROE of 7.5% and a P/B ratio of 6.5 highlight the valuation premium investors are paying. Despite a 51% increase in profits over the past year, the PEG ratio of 2.2 suggests growth expectations are priced in at a high level. The bearish technical grade reinforces the need for caution in the current market environment.
In conclusion, Azad Engineering Ltd’s 'Sell' rating reflects a balanced assessment of its current fundamentals and market conditions. Investors should carefully weigh the risks associated with the stock’s valuation and technical outlook against its earnings growth before making investment decisions.
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