Elgi Equipments Receives 'Sell' Rating Amidst Poor Long-Term Growth and Declining Profits

Elgi Equipments, a leading manufacturer of compressors and pumps, has recently received a 'Sell' rating from MarketsMOJO. This downgrade comes as the company has shown poor long-term growth, with net sales only increasing by an annual rate of 11.95% over the last 5 years.
In their latest financial results for September 2024, Elgi Equipments reported flat results with a decline in profits. The company's PAT (9M) has grown at a negative rate of -24.26%, while their interest (9M) has increased by 34.58%. This has led to a technical trend of being mildly bearish, with the stock generating -6.62% returns since the downgrade on 13-Nov-24.

Furthermore, multiple factors such as MACD, Bollinger Band, and KST have also contributed to the bearish outlook for the stock. With a ROE of 19, Elgi Equipments is currently trading at a very expensive valuation with a price to book value of 11.3. However, it is currently trading at a discount compared to its average historical valuations.

In the past year, while the stock has generated a return of 11.87%, its profits have fallen by -18.5%. This underperformance has also been reflected in the market, with the stock generating lower returns (11.87%) compared to the market (BSE 500) returns of 26.05%.

Despite these factors, Elgi Equipments has shown high management efficiency with a ROCE of 15.14%. The company also has a strong ability to service debt, with a low debt to EBITDA ratio of 1.03 times. Additionally, the company has a high institutional holding of 34.45%, indicating that these investors have better capability and resources to analyze the fundamentals of the company.

With a market cap of Rs 19,490 crore, Elgi Equipments is the biggest company in the compressors and pumps sector, constituting 24.49% of the entire industry. Its annual sales of Rs 3,357.69 crore also make up 21.45% of the industry. While the stock may currently be facing some challenges, it remains a significant player in its sector and has the potential to bounce back in the future.