Loyal Equipments Ltd Downgraded to Strong Sell Amid Deteriorating Technicals and Valuation Concerns

Technical Indicators Turn Bearish

The primary catalyst for the downgrade stems from a marked deterioration in the technical outlook. The company’s technical grade shifted from mildly bearish to outright bearish, signalling increased downside risk in the near term. Key technical metrics underpinning this change include a weekly MACD reading firmly in bearish territory, while the monthly MACD remains mildly bearish. Bollinger Bands reinforce this negative momentum, showing bearish signals on both weekly and monthly charts.

Daily moving averages also confirm the downtrend, with prices consistently trading below key averages. Although the KST (Know Sure Thing) indicator shows a mildly bullish signal on the weekly timeframe, it remains mildly bearish monthly, indicating mixed momentum but with a prevailing negative bias. Dow Theory assessments reveal no clear trend weekly and a mildly bearish stance monthly, further underscoring the technical weakness.

Price action has been subdued, with the stock closing at ₹170.00 on 9 February 2026, down 1.73% from the previous close of ₹173.00. The 52-week high stands at ₹363.90, while the low is ₹155.00, highlighting significant volatility and a substantial retracement from peak levels. Today’s trading range between ₹168.00 and ₹181.90 reflects ongoing uncertainty.

Valuation Profile Shifts to Fair from Very Attractive

Alongside technical deterioration, the valuation grade for Loyal Equipments has been downgraded from very attractive to fair. The company currently trades at a price-to-earnings (PE) ratio of 20.61, which is moderate but less compelling compared to its historical levels and some peers. The price-to-book value stands at 3.45, indicating a premium over book value but not excessive in the context of the sector.

Enterprise value multiples also reflect this shift: EV/EBITDA at 13.13 and EV/EBIT at 15.94 suggest the stock is fairly valued relative to earnings before interest, taxes, depreciation and amortisation. The PEG ratio is reported as 0.00, which may indicate either zero or negligible earnings growth expectations factored into the price. Dividend yield remains modest at 0.59%, while return on capital employed (ROCE) and return on equity (ROE) are healthy at 21.39% and 16.75% respectively, signalling operational efficiency despite valuation concerns.

When compared with peers such as Salasar Techno (very attractive valuation) and Bharat Wire (attractive), Loyal Equipments’ valuation appears less enticing. This relative positioning has contributed to the downgrade in the valuation grade, reflecting a more cautious stance on price appreciation potential.

Financial Trends Show Weakening Profitability

Financially, Loyal Equipments has exhibited negative performance trends in recent quarters, which have weighed heavily on investor sentiment. The company’s profit before tax (PBT) excluding other income for Q2 FY25-26 fell sharply by 64.44% to ₹1.44 crore, signalling significant margin pressure. Similarly, the profit after tax (PAT) for the nine months ended December 2025 declined by 20.03% to ₹6.27 crore, indicating sustained earnings contraction.

Return on capital employed (ROCE) for the half-year period is at a low 20.76%, reflecting diminished capital efficiency. Despite these setbacks, management efficiency remains relatively high, with a ROCE of 18.27% and ROE of 16.7%, suggesting that operational fundamentals are intact but currently overshadowed by broader market and sector headwinds.

Over the last year, the stock has underperformed the broader market significantly. While the BSE500 index generated a 9.00% return, Loyal Equipments delivered a negative return of -28.57%. This underperformance is compounded by a 5.8% decline in profits over the same period, highlighting the challenges faced by the company in maintaining growth momentum.

Long-Term Performance and Market Position

Despite recent setbacks, Loyal Equipments has demonstrated strong long-term returns. Over a 10-year horizon, the stock has delivered an impressive 774.04% return, vastly outperforming the Sensex’s 249.97% gain. Similarly, five-year and three-year returns stand at 441.40% and 146.38% respectively, underscoring the company’s historical growth trajectory and value creation for shareholders.

However, the recent negative trends and technical deterioration have overshadowed these gains, prompting a reassessment of the stock’s near-term prospects. The majority shareholding remains with promoters, which may provide some stability but also concentrates risk.

Summary and Outlook

The downgrade of Loyal Equipments Ltd to a Strong Sell rating by MarketsMOJO reflects a confluence of negative technical signals, a less attractive valuation profile, and weakening financial performance. The technical indicators, including MACD, Bollinger Bands, and moving averages, have shifted decisively bearish, signalling potential further downside in the stock price.

Valuation metrics suggest the stock is fairly priced but no longer offers the compelling discount it once did, especially when compared with peers in the industrial manufacturing and engineering equipment sectors. Financial results have disappointed recently, with significant declines in profitability and returns on capital, which have contributed to the cautious stance.

Investors should weigh these factors carefully, considering the stock’s strong long-term track record against the current headwinds. The downgrade serves as a warning signal to reassess exposure and consider alternative investment opportunities within the sector or broader market.

Unlock special upgrade rates for a limited period. Start Saving Now →