Technical Trends Show Signs of Stabilisation
The most significant driver behind the rating upgrade is the change in Garg Furnace’s technical grade, which moved from bearish to mildly bearish. Weekly MACD readings have turned mildly bullish, signalling a potential shift in momentum, although monthly MACD remains bearish, indicating caution over the longer term. The Relative Strength Index (RSI) on both weekly and monthly charts currently shows no clear signal, suggesting the stock is neither overbought nor oversold.
Bollinger Bands remain mildly bearish on both weekly and monthly timeframes, while daily moving averages also reflect a mildly bearish stance. The KST indicator, a momentum oscillator, continues to show bearish signals on weekly and monthly charts. Dow Theory analysis reveals a mildly bearish trend weekly but no definitive trend monthly. Overall, these mixed technical signals suggest the stock is stabilising after a prolonged downtrend but has yet to confirm a sustained uptrend.
On 5 Feb 2026, Garg Furnace closed at ₹136.10, up 0.55% from the previous close of ₹135.35. The stock traded within a range of ₹133.30 to ₹138.95 during the day, remaining well below its 52-week high of ₹266.00 but above the 52-week low of ₹120.10. This price action reflects cautious optimism among traders.
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Valuation Metrics Improve to Attractive
Alongside technical improvements, Garg Furnace’s valuation grade was upgraded from very attractive to attractive. The company currently trades at a price-to-earnings (PE) ratio of 9.94, which is low relative to many peers in the Steel/Sponge Iron/Pig Iron industry. Its price-to-book value stands at 1.00, indicating the stock is trading close to its book value, a sign of reasonable valuation.
Enterprise value to EBITDA ratio is 9.69, which is competitive within the sector, while EV to EBIT is 11.86. The PEG ratio is reported as 0.00, reflecting either zero or negligible earnings growth expectations factored into the price. Return on capital employed (ROCE) is 8.44%, and return on equity (ROE) is 10.07%, both modest but supportive of the valuation upgrade.
When compared with peers, Garg Furnace’s valuation is more attractive than companies like Hariom Pipe (PE 20.31, EV/EBITDA 8.91) and Ratnaveer Precis (PE 18.65, EV/EBITDA 12.18), though some peers such as Steel Exchange and Gandhi Spl. Tube trade at higher multiples. This relative valuation improvement has contributed to the upgrade in the company’s overall rating.
Financial Trend Remains Mixed Despite Recent Gains
Despite the upgrade, Garg Furnace’s financial trend remains a concern. The stock has underperformed the broader market significantly over the past year, delivering a negative return of -46.94% compared to the Sensex’s positive 6.66% return. This underperformance is notable given the BSE500 index’s 7.87% gain over the same period.
However, the company has demonstrated positive financial performance in recent quarters. For the nine months ended December 2025, profit after tax (PAT) grew by 41.72% to ₹7.27 crores. Quarterly PBDIT reached a high of ₹3.11 crores, and operating profit to net sales ratio improved to 5.07%, the highest recorded. These figures indicate operational improvements and better cost management.
Garg Furnace also maintains a strong ability to service debt, with a low debt-to-EBITDA ratio of 0.89 times, underscoring prudent financial management. Nevertheless, the stock’s long-term returns remain subdued, with a one-year return of -46.94% contrasting sharply with its impressive 5-year and 10-year returns of 1094.91% and 1405.53%, respectively. This suggests that while the company has faced short-term challenges, its long-term fundamentals have been robust.
Technical and Valuation Improvements Drive Rating Upgrade
The upgrade from Strong Sell to Sell on 4 Feb 2026 reflects a cautious but positive shift in sentiment. The technical indicators’ move from bearish to mildly bearish, combined with a more attractive valuation profile, have outweighed the negative impact of recent financial underperformance and market underwhelming returns.
Garg Furnace’s Mojo Score currently stands at 34.0, with a Mojo Grade of Sell, improved from a previous Strong Sell grade. The company holds a market cap grade of 4, indicating a mid-sized market capitalisation within its sector. Promoters remain the majority shareholders, providing stability in ownership.
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Long-Term Outlook and Investor Considerations
Investors should weigh the recent technical and valuation improvements against the company’s recent financial underperformance and market challenges. While the stock’s one-year return is disappointing, its long-term track record remains impressive, with 3-year, 5-year, and 10-year returns far outpacing the Sensex.
The company’s ability to generate positive operating profits and maintain a low debt burden is encouraging. However, the stock’s current trading price of ₹136.10 remains significantly below its 52-week high of ₹266.00, reflecting lingering investor caution.
Given these factors, the Sell rating suggests that while the stock is no longer a strong sell, investors should remain cautious and monitor further developments in technical trends and financial performance before considering accumulation.
Summary of Key Metrics
Price-to-Earnings Ratio: 9.94
Price-to-Book Value: 1.00
EV/EBITDA: 9.69
ROE: 10.07%
Debt to EBITDA: 0.89 times
One-Year Stock Return: -46.94%
One-Year Sensex Return: 6.66%
These metrics illustrate a company that is attractively valued relative to peers but faces near-term headwinds in market performance and financial momentum.
Conclusion
Garg Furnace Ltd’s upgrade to a Sell rating reflects a nuanced improvement in technical and valuation parameters, signalling a potential stabilisation after a prolonged downtrend. However, the company’s financial trends and recent market underperformance counsel caution. Investors should consider these factors carefully and watch for further confirmation of positive momentum before increasing exposure.
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