Chandni Machines Ltd Upgraded to Sell on Improved Financial and Technical Trends

Financial Performance: From Very Negative to Flat

The primary driver behind the upgrade is Chandni Machines’ stabilisation in financial trends. The company reported flat financial performance for the quarter ended December 2025, a marked improvement from the very negative trend observed in the preceding three months. The financial trend score improved from -20 to 0, signalling a halt in deterioration.

Key financial highlights include a record quarterly PAT of ₹1.85 crores and an EPS of ₹5.73, both the highest recorded in recent periods. Additionally, the company’s debtors turnover ratio for the half-year stood at an impressive 221.11 times, indicating efficient receivables management. However, these positives are tempered by significant concerns: net sales for the nine months ended December 2025 plunged by 82.63% to ₹25.90 crores, and the return on capital employed (ROCE) for the half-year was a low 5.80%. Cash and cash equivalents also remain critically low at ₹0.07 crores, raising liquidity concerns.

Non-operating income accounted for 131.69% of profit before tax in the quarter, suggesting that core operations are under pressure and that one-off gains are propping up profitability. The company’s ability to service debt remains weak, with an average EBIT to interest coverage ratio of just 0.56, underscoring financial vulnerability despite the recent stabilisation.

Valuation and Market Performance

Chandni Machines currently trades at ₹70.64, up 1.99% from the previous close of ₹69.26. The stock’s 52-week range spans from ₹31.00 to ₹127.74, indicating significant volatility. Despite the recent upgrade, the company’s Mojo Score remains low at 33.0, with a Mojo Grade of Sell, improved from a prior Strong Sell rating on 17 February 2026.

Over the past year, the stock has delivered a robust return of 49.66%, substantially outperforming the Sensex’s 9.81% gain. Longer-term returns are even more impressive, with a 3-year return of 320.48% and a 5-year return of 585.83%, dwarfing the Sensex’s respective 36.80% and 61.40% gains. However, these returns come amid a backdrop of declining net sales and weak operating metrics, suggesting that valuation remains stretched relative to fundamentals.

Technical Indicators: Mildly Bullish Signals Emerge

The technical outlook for Chandni Machines has shifted from sideways to mildly bullish, contributing to the upgrade in rating. Daily moving averages indicate a mildly bullish trend, while monthly MACD and Bollinger Bands also support a positive momentum. Conversely, weekly MACD and KST indicators remain mildly bearish, reflecting some short-term caution among traders.

RSI readings on both weekly and monthly charts show no clear signal, and Dow Theory analysis indicates a mildly bearish weekly trend with no definitive monthly trend. Overall, the technical picture is mixed but leans towards cautious optimism, supporting the revised Sell rating rather than a more aggressive Buy stance.

Quality Assessment and Long-Term Outlook

Chandni Machines’ quality grade remains challenged by weak long-term fundamentals. The company continues to report operating losses and negative EBITDA, which undermine its financial stability. Its ability to service debt is poor, and cash reserves are minimal, raising concerns about liquidity and operational resilience.

Despite these headwinds, the company’s consistent outperformance relative to the BSE500 index over the last three years and its strong returns over multiple time horizons provide some counterbalance. The majority of shareholders remain non-institutional, which may limit large-scale strategic interventions but also reflects a retail investor base that has supported the stock’s rally.

Investment Implications

The upgrade from Strong Sell to Sell reflects a cautious improvement in Chandni Machines’ outlook, driven primarily by stabilising financial trends and emerging technical support. Investors should note that while the company has halted its financial decline, significant risks remain, particularly related to weak sales growth, low cash reserves, and poor debt servicing capacity.

Valuation remains a concern given the stretched price relative to earnings and operating performance. The stock’s strong historical returns may attract momentum investors, but fundamental investors should remain wary until more consistent operational improvements are evident.

In summary, Chandni Machines Ltd’s revised rating to Sell signals a tentative step towards recovery but underscores the need for continued vigilance. Investors should monitor upcoming quarterly results closely for signs of sustained revenue growth and improved cash flow generation before considering a more positive stance.

Summary of Ratings and Scores

As of 18 February 2026, Chandni Machines holds a Mojo Score of 33.0 with a Mojo Grade of Sell, upgraded from Strong Sell on 17 February 2026. The financial trend score improved from -20 to 0, reflecting flat performance. Technical trends shifted from sideways to mildly bullish, supported by daily moving averages and monthly momentum indicators. Market capitalisation grade remains at 4, consistent with its micro-cap status in the Trading & Distributors sector.

Comparative Returns vs Sensex

Chandni Machines has outperformed the Sensex across multiple time frames, delivering a 1-year return of 49.66% against Sensex’s 9.81%, and a 5-year return of 585.83% compared to Sensex’s 61.40%. However, recent year-to-date returns are negative at -6.56%, slightly worse than the Sensex’s -2.08%, indicating some short-term pressure.

Conclusion

The upgrade to Sell from Strong Sell for Chandni Machines Ltd is a reflection of stabilising financials and improving technical signals, but the company’s fundamental challenges remain significant. Investors should weigh the improved outlook against persistent risks, particularly in sales decline and liquidity constraints, before making investment decisions.

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