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

COSCO (India), a microcap company in the leather industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 19, 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 (avg) of 7.72% also suggests low profitability per unit of shareholders' funds.
Despite declaring positive results for the last 5 consecutive quarters, COSCO (India) still faces challenges in terms of its financial health. However, there are some positive factors to consider, such as the company's highest operating profit to interest (Q) ratio of 2.71 times, PBDIT (Q) of Rs 3.36 crore, and PBT less OI (Q) of Rs 1.53 crore. Technically, the stock is in a mildly bullish range, with its MACD and KST technical factors also showing a bullish trend.

In terms of valuation, COSCO (India) has a fair valuation with a ROCE of 9.1 and an enterprise value to capital employed ratio of 1.9. The stock is currently trading at a discount compared to its average historical valuations. Over the past year, the stock has generated a return of 57.01%, while its profits have risen by 264.4%. This gives the company a PEG ratio of 0.1, indicating a potential undervaluation.

The majority shareholders of COSCO (India) are the promoters, which can be seen as a positive sign for the company's future. Despite its recent downgrade, the stock has still outperformed the market (BSE 500) with a return of 57.01% compared to the market's 37.46% return in the last year. However, it is important to note that this is not a recommendation to buy or sell the stock, as it is purely based on fact-based analysis. Investors are advised to do their own research and make informed decisions.