Kerala Ayurveda Faces Financial Challenges Amid Declining Profitability and High Debt Burden
Kerala Ayurveda, a microcap player in the Pharmaceuticals & Drugs industry, has recently undergone an evaluation adjustment that reflects its current financial standing. The company reported flat financial performance for the quarter ending December 2024, with a notable operating loss. Over the past five years, Kerala Ayurveda has experienced a decline in operating profit, averaging an annual rate of -3.45%. The company's financial metrics indicate a high debt burden, with a debt-to-equity ratio averaging 10.88 times, which raises concerns about its long-term fundamental strength. Additionally, the return on capital employed stands at a modest 5.75%, suggesting limited profitability relative to the total capital utilized.
In the latest quarter, the profit after tax was recorded at Rs -2.89 crore, reflecting a significant drop compared to the previous four-quarter average. The operating profit to interest ratio reached its lowest point at -2.77 times, further highlighting the challenges faced by the company.
Despite generating a return of 16.91% over the past year, Kerala Ayurveda's valuation appears expensive, with an enterprise value to capital employed ratio of 4.9. The technical trend remains sideways, indicating a lack of clear price momentum.
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