Borosil Renewables Ltd Upgraded to Hold by MarketsMOJO Amid Mixed Fundamentals

Technical Trends Shift to Mildly Bearish

The primary catalyst for the rating upgrade stems from a notable change in Borosil Renewables’ technical grade. Previously classified as bearish, the technical trend has now shifted to mildly bearish, indicating a less pessimistic market stance. Key technical indicators present a mixed but improving picture. The Moving Average Convergence Divergence (MACD) remains bearish on a weekly basis but has softened to mildly bearish on the monthly chart. Meanwhile, the Relative Strength Index (RSI) shows bullish momentum weekly, though it remains neutral monthly.

Bollinger Bands continue to signal mild bearishness on both weekly and monthly timeframes, while the daily moving averages remain bearish. However, the Know Sure Thing (KST) indicator reveals a bullish monthly trend despite weekly bearishness, suggesting potential for upward momentum in the medium term. Dow Theory and On-Balance Volume (OBV) indicators show no clear weekly trend but mildly bearish signals monthly. This blend of technical signals supports a cautious upgrade, reflecting a market that is stabilising but not yet fully bullish.

Robust Financial Performance Bolsters Confidence

Borosil Renewables’ financial trend has been a strong positive influence on the rating change. The company reported outstanding results for Q3 FY25-26, with operating profit surging by an extraordinary 2,518.8% year-on-year. This remarkable growth follows a healthy long-term annual operating profit increase of 596.76%, underscoring the company’s improving operational efficiency and profitability.

Profit After Tax (PAT) for the quarter stood at ₹86.45 crores, reflecting a 423.2% increase, while the Return on Capital Employed (ROCE) for the half-year reached a peak of 9.30%. The operating profit to interest ratio also hit a high of 40.88 times, indicating strong coverage of interest expenses and financial stability. These metrics highlight Borosil Renewables’ ability to generate substantial earnings growth despite a challenging macroeconomic environment.

Valuation Remains Expensive Despite Discount to Peers

Despite the strong financial performance, Borosil Renewables continues to carry a very expensive valuation. The company’s Price to Book (P/B) ratio stands at 8, which is high relative to typical industrial product sector standards. However, the stock is trading at a discount compared to its peers’ average historical valuations, suggesting some valuation comfort for investors.

The Price/Earnings to Growth (PEG) ratio is notably low at 0.2, reflecting the company’s rapid profit growth relative to its price. This low PEG ratio may indicate undervaluation when factoring in earnings momentum. Nevertheless, the stock’s one-year return of -8.50% contrasts with a 257.8% rise in profits, highlighting a disconnect between market price and fundamental earnings growth.

Quality Metrics Show Mixed Signals

Quality assessment of Borosil Renewables reveals a blend of strengths and weaknesses. The company holds a Mojo Score of 52.0 and a Mojo Grade of Hold, upgraded from Sell, reflecting moderate confidence in its overall quality. It commands a market capitalisation of ₹7,116 crores, making it the second largest player in the glass industry sector behind Asahi India Glass, and representing 17.68% of the sector’s market cap.

Annual sales of ₹1,489.46 crores constitute 15.51% of the industry, signalling a significant market presence. However, management efficiency remains a concern, with a low average Return on Equity (ROE) of 4.29%, indicating limited profitability per unit of shareholder funds. This contrasts with the company’s strong operating profit growth and suggests room for improvement in capital utilisation.

Additionally, domestic mutual funds hold a mere 0.72% stake in Borosil Renewables, which may reflect cautious sentiment or limited institutional conviction despite the company’s size and recent performance.

Stock Performance Versus Benchmark

Examining Borosil Renewables’ stock returns relative to the Sensex and BSE500 benchmarks reveals a mixed picture. The stock outperformed the Sensex over the short term, with a 6.09% gain in the past week compared to the Sensex’s 2.94%, and a 1.96% gain over the past month versus 0.59% for the Sensex.

However, longer-term returns have lagged. Year-to-date, the stock is down 5.78% while the Sensex fell 1.36%. Over the past year, Borosil Renewables declined 8.50%, contrasting with the Sensex’s 7.97% gain. Over three years, the stock returned 6.20% against the Sensex’s 38.25%, and over five years, it gained 71.10% compared to the Sensex’s 63.78%. Impressively, the ten-year return stands at 671.57%, significantly outperforming the Sensex’s 249.97% over the same period.

This performance pattern suggests that while the company has delivered exceptional long-term value, recent years have seen underperformance relative to broader market indices.

Summary and Outlook

The upgrade of Borosil Renewables Ltd from Sell to Hold reflects a balanced reassessment of its investment merits. The technical indicators have improved from bearish to mildly bearish, signalling a stabilising price trend. Financially, the company’s exceptional operating profit and PAT growth, alongside strong interest coverage and ROCE, provide a solid foundation for future earnings potential.

However, valuation remains on the expensive side, and management efficiency as measured by ROE is relatively low. The stock’s recent underperformance against benchmarks tempers enthusiasm, suggesting investors should remain cautious. The modest institutional holding by domestic mutual funds further indicates a wait-and-watch approach by professional investors.

Overall, Borosil Renewables presents a compelling case for cautious optimism. Investors may consider maintaining positions while monitoring technical signals and quarterly financial updates closely. The Hold rating reflects this balanced view, recognising both the company’s strengths and the risks inherent in its valuation and management metrics.

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