Cords Cable Industries Ltd Upgraded to Hold on Improved Technicals and Valuation

Technical Trends Shift to Mildly Bearish from Bearish

The primary catalyst for the rating upgrade stems from a notable change in the technical grade. Previously classified as bearish, the technical trend has moderated to mildly bearish, signalling a potential bottoming out of the stock’s price movement. 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. Similarly, the Bollinger Bands indicate sideways movement weekly and mildly bearish monthly, suggesting reduced volatility and a possible consolidation phase.

Other momentum indicators such as the Relative Strength Index (RSI) show no clear signal on both weekly and monthly timeframes, reflecting a neutral momentum stance. The Know Sure Thing (KST) oscillator remains bearish weekly but mildly bearish monthly, while Dow Theory readings have improved to mildly bullish weekly, though no trend is established monthly. On-Balance Volume (OBV) also shows mildly bullish signals weekly, indicating some accumulation by investors. Daily moving averages remain mildly bearish, but the overall technical landscape points to a stabilising stock price after a period of weakness.

Valuation Appears Attractive Amidst Peer Comparison

From a valuation standpoint, Cords Cable Industries Ltd is trading at a discount relative to its peers’ historical averages. The company’s Enterprise Value to Capital Employed (EV/CE) ratio stands at a compelling 1.2, which is considered very attractive in the cables sector. This valuation metric, combined with a Price/Earnings to Growth (PEG) ratio of just 0.3, suggests that the stock is undervalued relative to its earnings growth potential.

Despite a negative return of -8.10% over the past year, the company’s profits have risen by 42.2% during the same period, highlighting a disconnect between earnings performance and market pricing. This divergence offers a potential entry point for investors seeking value in the electrical cables industry. The stock’s current price of ₹179.25 remains well below its 52-week high of ₹222.00, further underscoring the valuation appeal.

Financial Trend Shows Consistent Profit Growth and Efficiency

Financially, Cords Cable has demonstrated robust performance in recent quarters. The company has reported positive results for eight consecutive quarters, with the latest half-year figures showing a Profit After Tax (PAT) of ₹7.45 crores, representing a growth of 35.21%. The Profit Before Tax excluding other income (PBT less OI) for the quarter stands at ₹4.31 crores, up 48.11% year-on-year.

Return on Capital Employed (ROCE) remains a standout metric, with the half-year figure reaching 16.63%, and the latest annualised ROCE at 15.70%. This high management efficiency metric indicates effective utilisation of capital to generate profits, a key quality parameter for investors. However, the company’s operating profit growth over the last five years has been moderate at an annualised rate of 10.50%, signalling some caution on long-term growth prospects.

Institutional investor participation has also increased, with holdings rising by 0.66% over the previous quarter to a collective 2.04%. This uptick reflects growing confidence from sophisticated market participants who typically conduct thorough fundamental analysis before increasing stakes.

Quality Assessment: Management Efficiency and Market Position

Cords Cable’s quality grade remains solid, supported by consistent profitability and efficient capital deployment. The company’s Mojo Score stands at 51.0, with a Mojo Grade upgraded from Sell to Hold, reflecting a balanced view of risk and opportunity. The market capitalisation grade is 4, indicating a micro-cap status but with reasonable liquidity and investor interest.

While the stock has underperformed the broader market indices such as the Sensex and BSE500 over the past year, its long-term returns have been impressive. Over a 10-year horizon, the stock has delivered a cumulative return of 285.07%, outpacing the Sensex’s 267.00%. Similarly, over five and three years, returns of 256.01% and 164.58% respectively have comfortably exceeded benchmark indices, underscoring the company’s capacity for wealth creation over extended periods.

Balancing Positives with Caution on Recent Underperformance

Despite the upgrade, investors should remain mindful of certain headwinds. The stock’s negative return of -8.10% over the last year contrasts sharply with the BSE500’s positive 13.00% return, indicating recent underperformance. This divergence may reflect market concerns over growth sustainability or sector-specific challenges.

Moreover, the operating profit growth rate of 10.50% over five years, while positive, is modest compared to some peers in the electrical cables industry. This slower growth trajectory tempers enthusiasm and justifies the Hold rating rather than a more bullish Buy or Strong Buy recommendation.

Technically, while the trend has improved, it remains mildly bearish overall, suggesting that the stock may still face resistance before a sustained uptrend can be confirmed. Investors should watch for further confirmation from technical indicators such as MACD and moving averages before increasing exposure aggressively.

Conclusion: A Measured Upgrade Reflecting Stabilising Fundamentals and Technicals

The upgrade of Cords Cable Industries Ltd from Sell to Hold reflects a comprehensive reassessment of its investment profile. Improvements in technical indicators, attractive valuation metrics, consistent financial performance, and high management efficiency have collectively supported this change. However, the company’s recent underperformance relative to the broader market and moderate long-term growth rate counsel caution.

For investors, the Hold rating suggests that Cords Cable is a stock to watch closely. Its discounted valuation and improving technicals offer potential upside, but confirmation of sustained momentum and stronger growth will be necessary to justify a more positive outlook. Institutional investor interest and solid profitability provide a foundation for stability, making it a viable candidate for inclusion in a diversified portfolio with a medium-term horizon.

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