Igarashi Motors India Downgraded to 'Hold' by MarketsMOJO on Strong Debt Servicing Ability

Igarashi Motors India, a smallcap company in the auto ancillary industry, has recently been downgraded to a 'Hold' by MarketsMOJO on November 4, 2024. This decision was based on the company's strong ability to service debt, with a low Debt to EBITDA ratio of 1.10 times.
In terms of financial performance, Igarashi Motors India declared very positive results in June 2024, with a growth in net profit of 58.75%. Its operating profit to net sales ratio was also at its highest at 11.40%, with a PAT of Rs 8.16 crore and net sales of Rs 222.07 crore, showing a growth of 22.5%.

Technically, the stock is currently in a mildly bullish range, with its MACD and OBV technical factors also being bullish. However, the company has shown poor long-term growth, with its operating profit growing at an annual rate of -10.27% over the last 5 years.

With a ROCE of 4.3, the company's valuation is considered expensive, with an enterprise value to capital employed ratio of 4.2. However, the stock is currently trading at a discount compared to its average historical valuations.

Despite its smallcap size, domestic mutual funds hold only 0.73% of the company, which could indicate that they are not comfortable with the current price or the business. This is surprising, as domestic mutual funds have the capability to conduct in-depth on-the-ground research on companies.

Overall, while Igarashi Motors India has shown positive financial results in the short term, its long-term growth and valuation may be a cause for concern. Investors may want to hold off on buying or selling this stock until further developments.