Borosil Scientific Ltd Upgraded to 'Sell' as Valuation and Technicals Improve

Technical Trend Improvement Spurs Upgrade

The primary catalyst for the rating upgrade lies in the technical analysis of Borosil Scientific’s stock. The technical grade has improved from a bearish to a mildly bearish stance, signalling a tentative stabilisation in price momentum. Key indicators reveal a mixed but cautiously optimistic picture: the weekly MACD remains bearish, yet the weekly RSI has turned bullish, suggesting some upward momentum in the short term. Meanwhile, Bollinger Bands on the weekly chart continue to show bearish tendencies, but the monthly bands indicate sideways movement, implying reduced volatility.

Daily moving averages remain bearish, and the KST (Know Sure Thing) indicator on the weekly chart is still bearish, but the absence of clear trends in Dow Theory and On-Balance Volume (OBV) on both weekly and monthly timeframes suggests the stock is consolidating rather than continuing a steep decline. This technical shift has been significant enough to warrant a one-notch upgrade in the technical grade, contributing to the overall rating improvement.

Valuation Metrics Shift from Expensive to Fair

Alongside technical improvements, Borosil Scientific’s valuation grade has been upgraded from expensive to fair. The company currently trades at a price-to-earnings (PE) ratio of 56.84, which, while high, is more reasonable compared to peers such as Asahi India Glass (PE 85.86) and Borosil Renewables (PE 183.29). The price-to-book value stands at 2.57, indicating moderate premium over book value, and the enterprise value to EBITDA ratio is 23.64, reflecting a fair valuation relative to earnings before interest, tax, depreciation and amortisation.

Return on capital employed (ROCE) is modest at 6.91%, and return on equity (ROE) is low at 4.53%, underscoring limited profitability. Despite these subdued returns, the valuation metrics suggest the stock is no longer excessively expensive, which has supported the upgrade in the valuation grade and contributed positively to the overall rating.

Financial Trend Remains Weak Despite Some Profit Growth

Despite the upgrade in technical and valuation parameters, Borosil Scientific’s financial trend remains a concern. The company reported negative financial performance in Q2 FY25-26, with profit after tax (PAT) declining by 61.39% to ₹5.34 crores and profit before tax less other income (PBT less OI) falling 55.8% compared to the previous four-quarter average. Non-operating income accounted for a significant 41.91% of PBT, indicating reliance on non-core earnings to bolster profitability.

Long-term growth has been underwhelming, with net sales growing at an annual rate of just 9.80% and operating profit increasing by a mere 2.86% over the last five years. The company’s management efficiency is also poor, reflected in a low ROE of 4.53%, signalling limited returns generated on shareholders’ equity. This weak financial trend weighs heavily against the company’s prospects and remains a key reason for the Sell rating despite the upgrade.

Technical and Valuation Improvements Offset by Underperformance

From a market performance perspective, Borosil Scientific has underperformed significantly. The stock has delivered a negative return of -30.04% over the past year, compared to a 9.10% gain in the Sensex. Over shorter periods, the stock’s returns have also lagged the benchmark: a 1-month return of -4.1% versus -0.76% for the Sensex, and a year-to-date return of -2.54% against -0.18% for the index. This underperformance extends to the BSE500 index over the last three years and three months, highlighting persistent challenges in investor sentiment and stock momentum.

Despite the company’s sizeable market capitalisation, domestic mutual funds hold a negligible 0.04% stake, suggesting limited institutional confidence. This small holding may reflect concerns about the company’s valuation, business model, or growth prospects, further tempering enthusiasm for the stock.

Quality Assessment and Debt Profile

Borosil Scientific’s quality grade remains low, consistent with its Sell rating. The company’s return on equity of 4.53% is well below industry averages, indicating poor utilisation of shareholder funds. Operating profit margins have been subdued, and growth in net sales has been modest at best. However, the company’s debt profile is conservative, with an average debt-to-equity ratio of zero, reflecting a clean balance sheet and limited financial leverage. This low debt level reduces financial risk but has not translated into improved profitability or growth.

Summary and Outlook

The upgrade of Borosil Scientific Ltd’s investment rating from Strong Sell to Sell is primarily driven by a modest improvement in technical indicators and a more reasonable valuation relative to peers. The technical trend’s shift from bearish to mildly bearish and the valuation grade’s move from expensive to fair have provided some positive momentum for the stock’s outlook.

Nevertheless, the company’s weak financial performance, poor management efficiency, and disappointing long-term growth remain significant headwinds. The stock’s underperformance relative to the Sensex and limited institutional interest further underscore the challenges facing Borosil Scientific. Investors should weigh these factors carefully, recognising that while the rating upgrade signals some improvement, the overall outlook remains cautious.

Key Financial and Market Metrics at a Glance

Current price: ₹117.00 (previous close ₹119.65)

52-week high/low: ₹190.45 / ₹109.80

Market Cap Grade: 3

Mojo Score: 31.0 (Sell, upgraded from Strong Sell)

PE Ratio: 56.84

Price to Book Value: 2.57

EV to EBITDA: 23.64

ROCE: 6.91%

ROE: 4.53%

1-year stock return: -30.04% vs Sensex +9.10%

Investors should continue to monitor technical signals and valuation trends closely, while remaining cautious about the company’s fundamental challenges and market underperformance.

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