Kirloskar Industries Downgraded to 'Sell' by MarketsMOJO, Despite Strong Long-Term Growth.

Kirloskar Industries, a smallcap company in the diversified industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 4, 2024. This downgrade is based on negative results in the quarter ending June 2024, with a decrease of 41.9% in PBT LESS OI(Q) at Rs 83.68 crore and a decrease of 50.0% in PAT(Q) at Rs 28.62 crore. Additionally, the company's ROCE(HY) has reached its lowest point at 12.16%.
One of the reasons for this downgrade is the fact that despite being a smallcap company, domestic mutual funds hold only 0.08% of the company. This could indicate that either they are not comfortable with the current price or the business itself. However, the company does have a strong ability to service debt with a low Debt to EBITDA ratio of 0.89 times.

On a positive note, Kirloskar Industries has shown healthy long-term growth with an annual growth rate of 24.16% in Net Sales and 41.87% in Operating profit. However, the technical trend for the stock is currently sideways, indicating no clear price momentum. The stock has also generated a negative return of -4% since November 1, 2024, when the technical trend deteriorated from Mildly Bullish.

Despite the recent downgrade, the stock is trading at a discount compared to its average historical valuations and has a Very Attractive valuation with a 1 Enterprise value to Capital Employed. In the past year, the stock has generated a return of 54.62%, while its profits have only risen by 0.2%. This could be a cause for concern for investors.

However, Kirloskar Industries has consistently outperformed the BSE 500 index in the last 3 annual periods, generating a return of 54.62%. This could be a positive sign for long-term investors. Overall, while the recent downgrade may raise some red flags, the company's consistent returns and attractive valuation could still make it a viable investment option for some investors.