B N Rathi Securities Ltd Upgraded to Sell on Improved Financial and Technical Metrics

Financial Trend: From Negative to Positive Momentum

The most significant driver behind the upgrade is the marked improvement in B N Rathi Securities’ financial trend. The company reported its highest quarterly net sales of ₹15.37 crores in December 2025, alongside a peak PBDIT of ₹2.00 crores. Operating profit margin also reached a quarterly high of 13.01%, signalling enhanced operational efficiency. Profit before tax excluding other income stood at ₹1.64 crores, while the company posted a quarterly PAT of ₹3.01 crores and an EPS of ₹0.72, all representing the best quarterly figures in recent periods.

These results reversed a negative financial trend score of -15 from the previous three months to a positive 10, indicating a turnaround in earnings momentum. However, the nine-month PAT remains subdued at ₹6.80 crores, reflecting a year-on-year decline of 25.11%. Additionally, non-operating income constitutes a substantial 59.10% of profit before tax, suggesting that core business profitability still requires strengthening.

Overall, the financial trend upgrade recognises the company’s return to profitability after four consecutive negative quarters, signalling potential stabilisation in its earnings trajectory.

Valuation: From Very Attractive to Attractive

B N Rathi Securities’ valuation grade has improved from very attractive to attractive, reflecting a more balanced risk-reward profile. The stock currently trades at a price-to-earnings (PE) ratio of 9.84, which is reasonable compared to its NBFC peers, many of whom are trading at significantly higher multiples. The price-to-book value stands at 0.96, indicating the stock is valued close to its net asset value, a positive sign for value investors.

Enterprise value (EV) multiples show negative figures for EV to EBIT (-15.00) and EV to EBITDA (-12.72), which is unusual but reflects the company’s current earnings and capital structure dynamics. The EV to capital employed ratio is 1.07, suggesting the market values the company slightly above its capital base. Dividend yield is a modest 2.94%, while return on equity (ROE) for the latest period is 7.74%, down from a longer-term average of 15.14%, but still indicative of some profitability.

Despite the stock’s 52-week high of ₹31.94 and low of ₹14.00, the current price of ₹16.93 offers an attractive entry point relative to historical valuations and sector averages. This valuation improvement supports the upgrade, although investors should remain mindful of the company’s earnings volatility.

Technicals: Shift from Bearish to Mildly Bearish

The technical outlook for B N Rathi Securities has shifted from bearish to mildly bearish, reflecting a cautious but slightly more optimistic market sentiment. Weekly MACD readings are mildly bullish, while monthly MACD remains bearish, indicating mixed momentum across timeframes. The weekly relative strength index (RSI) shows no clear signal, but the monthly RSI is bullish, suggesting some underlying strength in the longer term.

Bollinger Bands on both weekly and monthly charts remain mildly bearish, and daily moving averages also indicate a mildly bearish trend. The KST (Know Sure Thing) indicator is mildly bullish on the weekly chart but bearish monthly, while Dow Theory assessments mirror this mixed stance with weekly mildly bullish and monthly mildly bearish signals.

Overall, technical indicators suggest the stock is attempting to stabilise after a prolonged downtrend but has yet to confirm a sustained uptrend. This nuanced technical picture justifies the upgrade to Sell from Strong Sell but stops short of a more positive rating.

Quality: Persistent Challenges Despite Long-Term Strength

While the company’s quality rating remains a concern, there are some encouraging signs. B N Rathi Securities has demonstrated strong long-term fundamental strength, with an average ROE of 15.14% over several years. However, recent earnings have been inconsistent, with profits declining by 36.9% over the past year and a significant underperformance relative to the broader market.

Over the last one year, the stock has delivered a negative return of -46.98%, compared to a 9.66% gain in the Sensex and a 13.31% return from the BSE500 index. This underperformance highlights ongoing challenges in operational execution and market sentiment. The majority of shareholders remain non-institutional, which may limit the stock’s liquidity and institutional interest.

Despite these hurdles, the company’s recent quarterly turnaround and attractive valuation metrics provide a foundation for cautious optimism, supporting the modest upgrade in quality assessment.

Market Performance and Outlook

Despite the recent upgrade, investors should note that B N Rathi Securities has underperformed the market significantly over the past year. While the Sensex and BSE500 indices have delivered positive returns of 9.66% and 13.31% respectively, the stock has declined by nearly 47%. This divergence underscores the risks associated with the company’s turnaround story and the need for continued monitoring of its financial and operational progress.

Longer-term returns paint a more favourable picture, with the stock generating 79.63% over three years, 165.57% over five years, and an impressive 301.90% over ten years, outperforming the Sensex’s respective returns of 35.81%, 59.83%, and 259.08%. This suggests that patient investors who can withstand volatility may be rewarded over time.

Technically, the stock’s recent price action has been encouraging, with a one-week gain of 11.90% and a one-month gain of 6.88%, both outperforming the Sensex’s negative returns over the same periods. The stock’s intraday trading range on 17 Feb 2026 was ₹15.20 to ₹18.00, closing at ₹16.93, up from the previous close of ₹15.13.

Conclusion: A Cautious Upgrade Reflecting Early Signs of Recovery

The upgrade of B N Rathi Securities Ltd from Strong Sell to Sell reflects a cautious but positive reassessment of the company’s prospects. Improved quarterly financial results, a more attractive valuation, and a stabilising technical outlook have all contributed to this change. However, persistent challenges such as negative nine-month PAT growth, reliance on non-operating income, and significant underperformance relative to the market temper enthusiasm.

Investors should weigh the company’s long-term fundamental strength and recent operational improvements against ongoing risks and market volatility. The current rating suggests that while the stock is no longer a strong sell, it remains a speculative investment requiring careful monitoring of future earnings and market developments.

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