Incredible Industries Faces Mixed Signals Amidst Financial and Technical Shifts

Quality of Financial Performance

Incredible Industries has reported positive financial outcomes for the second quarter of fiscal year 2025-26, continuing a streak of favourable results over the last five quarters. The company’s profit after tax (PAT) for the first nine months stands at ₹11.05 crores, reflecting a growth rate of 63.95% compared to previous periods. This robust profit expansion is complemented by a return on capital employed (ROCE) reaching 11.45% in the half-year, marking the highest level recorded recently.

Despite these encouraging figures, the company’s long-term fundamental strength remains under scrutiny. The average ROCE over an extended period is 8.04%, which is modest relative to industry benchmarks. Additionally, the return on equity (ROE) is at 9.4%, suggesting moderate efficiency in generating shareholder returns. These metrics indicate that while recent quarters have shown improvement, the overall quality of financial performance is tempered by historical trends.

Valuation Considerations

From a valuation standpoint, Incredible Industries presents an intriguing case. The stock is trading at a price-to-book value of 1.2, which is lower than the average historical valuations of its peers within the Iron & Steel Products sector. This discount could be interpreted as an opportunity for value-oriented investors seeking exposure to the steel industry at a relatively modest premium.

Moreover, the company’s price-to-earnings growth (PEG) ratio stands at 0.2, reflecting a scenario where profit growth significantly outpaces the stock price appreciation over the past year. Despite the stock generating a negative return of -14.89% in the last twelve months, profits have risen by 82.4%, highlighting a divergence between earnings momentum and market valuation.

Financial Trend and Market Returns

Examining the stock’s performance relative to broader market indices reveals a challenging environment for Incredible Industries. Over the past year, the stock has recorded a return of -14.89%, underperforming the BSE500 index, which has delivered a positive return of 1.32% during the same period. This underperformance extends to the Sensex as well, which has generated a 3.75% return over one year.

Longer-term returns present a mixed picture. Over three years, Incredible Industries has outpaced the Sensex with a 69.18% gain compared to the index’s 37.89%. However, over five years, the stock’s return of 55.98% trails the Sensex’s 84.19%. The ten-year return is notably negative at -71.01%, contrasting sharply with the Sensex’s robust 236.54% growth, underscoring the volatility and cyclical nature of the company’s stock performance.

Additional concerns arise from the company’s shareholding structure. Approximately 68.03% of promoter shares are pledged, which can exert downward pressure on the stock price during market downturns, adding a layer of risk for investors.

Technical Analysis and Market Sentiment

The technical landscape for Incredible Industries has shifted towards a more cautious stance. Weekly and monthly moving average convergence divergence (MACD) indicators suggest bearish to mildly bearish momentum. Bollinger Bands on both weekly and monthly charts also signal bearish trends, while the relative strength index (RSI) remains neutral without clear directional signals.

Other technical indicators such as the Know Sure Thing (KST) oscillator and Dow Theory analysis reflect mildly bearish conditions on a monthly basis, with weekly trends showing no definitive direction. The on-balance volume (OBV) indicator presents a contrasting bullish signal on the monthly chart, indicating some accumulation despite price weakness.

Daily moving averages show mildly bullish tendencies, suggesting short-term support levels may be in place. However, the overall technical trend has transitioned from sideways to mildly bearish, reflecting a more cautious market assessment of the stock’s near-term prospects.

Price Movements and Trading Range

In recent trading sessions, Incredible Industries’ stock price has fluctuated between ₹37.70 and ₹41.80, closing at ₹40.01, down from the previous close of ₹40.74. The stock’s 52-week high is ₹55.20, while the 52-week low stands at ₹28.83, indicating a wide trading range and significant volatility over the past year.

These price movements, combined with the technical indicators, suggest that while there is some short-term buying interest, the stock remains under pressure from broader market forces and internal structural challenges.

Summary and Investor Considerations

Incredible Industries presents a complex investment profile characterised by positive recent financial results and profit growth, yet tempered by subdued long-term fundamentals and a challenging technical outlook. The stock’s valuation metrics suggest it is trading at a discount relative to peers, which may attract value-focused investors. However, the high proportion of pledged promoter shares and the stock’s underperformance relative to market indices over the past year introduce cautionary elements.

Technical indicators point to a shift towards mildly bearish momentum, signalling that market sentiment is currently cautious. Investors should weigh the company’s improving profitability against these technical and structural factors when considering exposure to Incredible Industries.

Given the mixed signals across quality, valuation, financial trends, and technical analysis, a balanced and well-informed approach is advisable for those monitoring this stock within the Iron & Steel Products sector.

Only ₹14,999 - Get MojoOne + Stock of the Week for 2 Years PLUS 6 Months FREE Claim 83% OFF →