COSCO (India) Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt

COSCO (India), a microcap company in the leather industry, has recently been downgraded to a 'Sell' by MarketsMOJO on May 2nd, 2024. This decision was based on the company's weak long-term fundamental strength, with a -11.00% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 4.71 times, indicating a low ability to service debt. The return on equity for the company has also been low at 7.72%, showing a lack of profitability per unit of shareholders' funds.
Despite declaring positive results for the last 3 consecutive quarters, with a higher PAT (HY) of Rs 1.81 crore and the highest operating profit to interest (Q) at 2.40 times, COSCO (India) is still facing challenges. On a technical level, the stock is in a mildly bullish range, with its MACD and KST technical factors also being bullish.

With a ROCE of 9.1, the stock is fairly valued with a 2 enterprise value to capital employed. However, it is currently trading at a discount compared to its average historical valuations. While the stock has generated a return of 96.08% in the past year, its profits have only risen by 44.8%, resulting in a PEG ratio of 1.4.

The majority shareholders of COSCO (India) are the promoters, and the company has shown market-beating performance in both the long-term and near-term. In the last 3 years, 1 year, and 3 months, the stock has outperformed BSE 500, further highlighting its potential for growth. However, considering the current financial situation of the company, MarketsMOJO has downgraded its stock call to 'Sell'.