Lehar Footwears Downgraded to Sell Amid Mixed Financial and Valuation Signals

Financial Trend: From Outstanding to Positive

The most significant factor behind the rating change is the shift in Lehar Footwears’ financial trend score, which has declined sharply from an outstanding 32 to a positive 8 over the past three months. While the company reported robust net sales of ₹197.65 crores in the latest six-month period, reflecting an impressive growth rate of 89.01%, and a corresponding 173.04% increase in PAT to ₹9.42 crores, the quarterly figures tell a more cautious story.

In the most recent quarter, net sales dropped to ₹57.13 crores, marking the lowest quarterly sales in recent periods. Profit before depreciation, interest, and taxes (PBDIT) also fell to ₹5.64 crores, while profit before tax excluding other income (PBT less OI) declined to ₹2.85 crores. Earnings per share (EPS) for the quarter stood at ₹1.20, the lowest recorded in recent quarters. Most notably, quarterly PAT plunged by 60.9% compared to the average of the previous four quarters, signalling potential volatility in earnings quality.

These mixed financial signals suggest that while the company maintains a positive growth trajectory over the medium term, short-term operational challenges and margin pressures have emerged, prompting a more cautious stance from analysts.

Valuation: Downgraded from Very Attractive to Attractive

Lehar Footwears’ valuation grade has also been revised downward, moving from very attractive to merely attractive. The company currently trades at a price-to-earnings (PE) ratio of 18.31, which is reasonable but less compelling compared to its previous standing. Other valuation multiples include a price-to-book value of 3.16, an enterprise value to EBIT ratio of 12.89, and an EV to EBITDA of 11.11. The EV to capital employed ratio stands at 2.52, indicating moderate capital efficiency.

Despite these figures, the company’s PEG ratio remains exceptionally low at 0.09, signalling that earnings growth is not fully priced into the stock. Return on capital employed (ROCE) is healthy at 19.91%, and return on equity (ROE) is 17.25%, both reflecting solid profitability metrics. Dividend yield, however, is modest at 0.22%, which may limit income appeal for yield-focused investors.

When compared with peers in the leather and footwear sector, Lehar Footwears’ valuation is competitive but no longer stands out as a bargain. This re-rating reflects a more tempered outlook on the company’s growth prospects relative to its current market price.

Quality Assessment: Mixed Signals Amid Long-Term Growth

Lehar Footwears continues to demonstrate strong long-term growth fundamentals. Over the past five years, the stock has delivered a staggering return of 920.41%, vastly outperforming the Sensex’s 59.83% return over the same period. Even over three and ten-year horizons, the company’s returns of 158.47% and 477.66% respectively, significantly exceed benchmark indices.

Operationally, the company has maintained a positive trajectory with net sales growing at an annualised rate of 30.55% and operating profit expanding by 56.92%. The firm has declared positive results for four consecutive quarters, underscoring a degree of consistency in earnings generation.

However, the recent quarterly performance volatility and the stock’s underperformance relative to the broader market over the last year—where it posted a negative return of -7.67% against the BSE500’s 13.31% gain—have raised concerns about the sustainability of its quality metrics. These factors have contributed to a cautious downgrade in the overall quality grade.

Technicals: Weakness Evident in Recent Price Action

From a technical perspective, Lehar Footwears has exhibited signs of weakness in recent trading sessions. The stock closed at ₹225.00 on 17 Feb 2026, down 3.43% from the previous close of ₹233.00. Intraday price movement ranged between ₹217.00 and ₹229.85, with the current price closer to the 52-week low of ₹193.00 than the high of ₹322.20.

Short-term returns have lagged the Sensex, with a one-week decline of 1.77% versus the benchmark’s 0.94% fall, and a one-month drop of 4.19% compared to the Sensex’s 0.35% dip. Year-to-date, the stock has remained flat, while the Sensex has declined by 2.28%. This relative underperformance, combined with weakening quarterly earnings, suggests that technical momentum is currently unfavourable.

Investors should note that the stock’s market capitalisation grade remains low at 4, reflecting limited liquidity and market interest, which may exacerbate price volatility.

Conclusion: A Cautious Stance Amid Contrasting Signals

Lehar Footwears Ltd’s downgrade from Hold to Sell reflects a nuanced assessment of its current standing. While the company boasts strong long-term growth, attractive profitability ratios, and a historically impressive return record, recent quarterly earnings volatility, subdued technical momentum, and a less compelling valuation profile have tempered enthusiasm.

Investors should weigh the company’s positive medium-term financial trends against the short-term operational challenges and market underperformance. The stock’s low PEG ratio and solid ROCE suggest potential value, but the risk of continued earnings softness and price weakness cannot be ignored.

Majority ownership remains with promoters, which may provide some stability, but the overall investment case now calls for caution. Market participants are advised to monitor upcoming quarterly results closely and consider peer comparisons before committing fresh capital.

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