Hathway Cable & Datacom Ltd Upgraded to Sell on Technical and Valuation Improvements

Technical Trends Shift to Mildly Bearish

The primary catalyst for the upgrade lies in the technical analysis of Hathway Cable’s stock price movements. The technical grade has improved from a firmly bearish stance to a mildly bearish one, indicating a potential stabilisation in market sentiment. Weekly and monthly Moving Average Convergence Divergence (MACD) indicators remain bearish, signalling that momentum is still subdued. However, the Relative Strength Index (RSI) on a weekly basis has turned bullish, suggesting short-term buying interest is gaining traction.

Bollinger Bands on both weekly and monthly charts continue to show mild bearishness, reflecting moderate volatility and price compression. Daily moving averages remain bearish, but the Dow Theory weekly indicator has shifted to mildly bullish, hinting at emerging positive trends in market breadth. On-Balance Volume (OBV) readings for both weekly and monthly periods are mildly bullish, indicating that volume trends are beginning to support price gains. Overall, these mixed signals have led to a technical grade upgrade, reflecting a cautious but improved outlook for the stock’s near-term price action.

Valuation Moves from Attractive to Fair

Alongside technical improvements, Hathway Cable’s valuation grade has been revised from attractive to fair. The company currently trades at a price-to-earnings (PE) ratio of 22.87, which is moderate relative to its sector peers. The price-to-book (P/B) value stands at 0.51, indicating the stock is trading at roughly half its book value, a discount that may appeal to value investors.

Enterprise value to EBIT (EV/EBIT) and EBITDA (EV/EBITDA) ratios are negative at -9.44 and -0.18 respectively, reflecting the company’s current earnings challenges. The PEG ratio remains at zero, signalling no expected earnings growth factored into the price. Return on equity (ROE) is low at 2.22%, underscoring limited profitability relative to shareholder funds. Despite these concerns, Hathway’s valuation is considered fair given its depressed earnings and the discount relative to peers such as Den Networks, which is rated as risky with a PE of 7.8 and more negative EV/EBITDA metrics.

Financial Trend Remains Challenging

Despite the technical and valuation upgrades, Hathway Cable’s financial performance continues to disappoint. The company reported a negative quarter in Q2 FY25-26, with profit after tax (PAT) falling by 29.1% to ₹18.25 crores and profit before tax less other income (PBT less OI) declining by 19.59% to ₹7.43 crores. Operating profit has contracted at an alarming annual rate of -43.82% over the past five years, signalling deteriorating operational efficiency.

Management efficiency remains poor, with an average ROE of just 2.84%, indicating low returns generated on shareholders’ equity. The debtors turnover ratio for the half-year period is a mere 0.48 times, the lowest in the sector, highlighting potential issues in receivables management. Notably, domestic mutual funds hold no stake in Hathway Cable, which may reflect institutional scepticism about the company’s prospects or valuation at current levels.

Long-Term Returns Lag Behind Benchmarks

Hathway Cable’s stock performance has significantly underperformed key market indices over multiple time horizons. The stock has delivered a negative return of -21.41% over the last year, compared with a 7.28% gain in the Sensex. Over three and five years, the stock’s returns stand at -27.84% and -61.69% respectively, while the Sensex has appreciated by 40.21% and 79.16% over the same periods. The 10-year return is even more stark, with Hathway down -71.52% against a Sensex gain of 227.83%.

This persistent underperformance underscores the company’s struggles to generate sustainable growth and shareholder value, despite its sizeable market presence in the media and entertainment sector.

Technical and Valuation Outlook in Context

Hathway Cable’s current share price of ₹12.70, up 1.76% on the day, remains well below its 52-week high of ₹17.95 and only slightly above its 52-week low of ₹11.56. The stock’s daily trading range today was between ₹12.40 and ₹12.71, reflecting modest volatility. The company’s market capitalisation grade remains low at 3, consistent with its small-cap status and limited institutional interest.

While the technical indicators suggest a tentative shift towards stability, the overall trend remains cautious. The mixed signals from MACD, RSI, Bollinger Bands, and moving averages imply that investors should remain vigilant for confirmation of sustained momentum before committing to a more bullish stance.

Valuation metrics indicate that Hathway Cable is fairly priced relative to its earnings and book value, but the negative EV/EBIT and EV/EBITDA ratios highlight ongoing profitability challenges. The low ROE and negative operating profit growth over five years further temper enthusiasm for the stock’s medium to long-term prospects.

Investment Implications

For investors, the upgrade from Strong Sell to Sell reflects a modest improvement in technical and valuation parameters but does not signal a fundamental turnaround. The company’s weak financial trends, poor management efficiency, and sustained underperformance relative to market benchmarks suggest that caution remains warranted.

Those considering exposure to Hathway Cable should weigh the potential for short-term technical gains against the backdrop of structural challenges in profitability and growth. The absence of domestic mutual fund interest further underscores the need for thorough due diligence and risk assessment.

In summary, Hathway Cable & Datacom Ltd’s rating upgrade is driven primarily by a shift in technical momentum and a reclassification of valuation from attractive to fair. However, the company’s financial and operational metrics continue to lag, supporting a Sell recommendation rather than a more optimistic outlook.

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