KDDL Ltd Faces Profit Decline Amid Rising Interest Expenses and Low ROCE

KDDL Ltd, a small-cap player in the Gems, Jewellery and Watches industry, has recently undergone an adjustment in its evaluation. This revision reflects a combination of financial metrics and market positioning that warrants attention.
In the latest quarter, Q4 FY24-25, KDDL reported a decline in profit after tax (PAT) to Rs 20.31 crore, marking a notable change of -20.6%. Additionally, the company's interest expenses over the past nine months have shown growth, reaching Rs 24.35 crore, which represents an increase of 23.60%. The return on capital employed (ROCE) has also been highlighted as a concern, recorded at its lowest level of 16.14%.

Despite the company's small size, domestic mutual funds hold no stake in KDDL, which may indicate a lack of confidence in its current valuation or business outlook. Over the past year, KDDL has underperformed the broader market, with a return of -20.03%, compared to the BSE500's decline of -2.26%.

On a positive note, KDDL demonstrates a strong capacity to manage debt, evidenced by a low Debt to EBITDA ratio of 1.05 times. Furthermore, the company has shown healthy long-term growth, with operating profit increasing at an annual rate of 46.04%. The stock is currently trading at a discount relative to its peers, with a price-to-book value of 3.7 and a return on equity (ROE) of 10.3.

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