Kirloskar Industries Downgraded to 'Sell' by MarketsMOJO Due to Negative Results and Low Mutual Fund Holdings

Kirloskar Industries, a midcap diversified company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 18, 2024. This downgrade is based on negative results in the June 2024 quarter, 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 its size, domestic mutual funds hold only 0.08% of the company. This could indicate that 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 technical trend has also deteriorated since October 18, 2024, generating a return of -2.82%.

Despite the recent downgrade, the stock does have some attractive qualities. With a ROCE of 11.7, it is currently trading at an attractive valuation with a 1.1 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations. In the past year, the stock has generated a return of 64.15%, while its profits have only risen by 0.2%.

Furthermore, Kirloskar Industries has consistently outperformed the BSE 500 index in the last 3 annual periods, with a return of 64.15%. This shows that the company has been able to consistently deliver returns to its investors. However, it is important to note that this is not a recommendation to buy or sell the stock, as MarketsMOJO has a neutral stance and does not consider future potential or expert opinions.