Lancor Holdings Ltd Upgraded to Sell on Technical Improvement Despite Weak Fundamentals

Quality Assessment: Weak Fundamentals Persist

Despite the recent upgrade in rating, Lancor Holdings continues to exhibit weak fundamental quality. The company’s long-term financial strength remains under pressure, with an average Return on Capital Employed (ROCE) of just 6.55%, signalling limited efficiency in generating returns from its capital base. Operating profit growth has been modest, expanding at an annual rate of 6.20% over the past five years, which is below industry expectations for a growth-oriented realty firm.

Moreover, the company’s ability to service debt is a significant concern. The Debt to EBITDA ratio stands at a high 8.83 times, indicating elevated leverage and potential liquidity risks. This is compounded by the very negative quarterly financial performance reported in Q2 FY25-26, where net sales declined by 18.06% year-on-year to ₹33.75 crores, a 31.2% drop compared to the previous four-quarter average. Profit before tax excluding other income plunged by 642.1%, resulting in a net loss after tax of ₹2.52 crores, down 633.3% from the prior period average.

Valuation: Attractive but Reflective of Risks

On the valuation front, Lancor Holdings presents an attractive profile relative to its peers. The company’s ROCE of approximately 5% aligns with a low enterprise value to capital employed ratio of 1, suggesting the stock is trading at a discount compared to historical valuations within the realty sector. This valuation discount partly reflects the market’s cautious stance given the company’s weak profitability and high leverage.

However, the stock’s price performance has been disappointing over the past year, with a return of -26.23%, significantly underperforming the BSE500 index, which generated a positive 6.41% return over the same period. This underperformance is further underscored by a 140.4% decline in profits over the last year, signalling that the market is pricing in the company’s operational and financial challenges.

Financial Trend: Negative Performance Amidst Market Underperformance

The financial trend for Lancor Holdings remains negative, with the company reporting deteriorating quarterly results and a declining sales trajectory. The Q2 FY25-26 results were particularly weak, with net sales falling sharply and profitability turning negative. This trend is consistent with the stock’s underperformance relative to the broader market indices.

Over the last one year, Lancor Holdings has generated a negative return of -26.23%, in stark contrast to the Sensex’s 9.06% gain over the same period. Even over the medium term, the stock has lagged behind, although it has delivered a respectable 38.88% return over three years, slightly below the Sensex’s 40.07%. The five-year return of 502.97% is notable but reflects a period of strong past performance that has not been sustained recently.

Technicals: Shift to Mildly Bullish Momentum Spurs Upgrade

The primary driver behind the upgrade from Strong Sell to Sell is the improvement in technical indicators, signalling a shift in market sentiment. The technical trend has moved from sideways to mildly bullish, supported by several key metrics:

• MACD: Weekly readings remain mildly bearish, while monthly indicators continue to show bearish momentum, suggesting some caution remains.


• RSI: Both weekly and monthly Relative Strength Index readings show no clear signal, indicating a neutral momentum stance.


• Bollinger Bands: Weekly indicators are bullish, reflecting recent price strength, whereas monthly bands remain mildly bearish.


• Moving Averages: Daily moving averages have turned mildly bullish, supporting short-term upward price movement.


• KST (Know Sure Thing): Weekly KST is bullish, but monthly remains bearish, indicating mixed momentum across timeframes.


• Dow Theory: Weekly shows no clear trend, but monthly readings are mildly bullish, suggesting a nascent uptrend.


• On-Balance Volume (OBV): Weekly OBV is mildly bullish, signalling accumulation, while monthly OBV shows no trend.

These mixed but improving technical signals have encouraged analysts to revise the stock’s technical grade upwards, which in turn has influenced the overall Mojo Grade upgrade to Sell from Strong Sell. The stock price has responded modestly, closing at ₹25.39 on 1 Jan 2026, up 1.60% from the previous close of ₹24.99, with a 52-week range between ₹19.39 and ₹36.58.

Market Capitalisation and Shareholding

Lancor Holdings holds a market cap grade of 4, reflecting its micro-cap status within the realty sector. The majority shareholding remains with promoters, which can be a double-edged sword—providing stability but also concentration risk. Investors should weigh this factor alongside the company’s financial and technical profile when considering exposure.

Conclusion: Upgrade Reflects Technical Optimism Amidst Fundamental Challenges

The upgrade of Lancor Holdings Ltd’s investment rating from Strong Sell to Sell is primarily a reflection of improved technical indicators signalling a mild bullish momentum. However, the company’s fundamental challenges remain significant, including weak profitability, high leverage, and negative recent financial trends. Valuation metrics suggest the stock is attractively priced relative to peers, but this discount largely compensates for the risks involved.

Investors should approach Lancor Holdings with caution, recognising that while technical signals may offer short-term trading opportunities, the underlying financial health and market underperformance warrant a conservative stance. Monitoring upcoming quarterly results and any shifts in debt servicing capacity will be critical to reassessing the company’s outlook going forward.

Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Today