Loyal Equipments Ltd Upgraded to Sell on Technical Improvements Despite Financial Challenges

Quality Assessment: High Management Efficiency Amidst Financial Struggles

Loyal Equipments maintains a commendable level of management efficiency, as evidenced by its return on capital employed (ROCE) of 18.27% and return on equity (ROE) of 16.7%. These figures suggest that the company’s leadership is effectively utilising capital to generate returns, a positive sign in an otherwise challenging environment. However, the latest half-year ROCE has dipped to 20.76%, marking the lowest point in recent periods and signalling some operational headwinds.

Despite these pressures, the company’s promoter group continues to hold a majority stake, indicating stable ownership and potential for strategic continuity. The quality grade remains a critical factor for investors weighing the company’s long-term prospects against its recent financial setbacks.

Valuation: Fair but Discounted Relative to Peers

From a valuation standpoint, Loyal Equipments is trading at a price-to-book (P/B) ratio of 3.6, which is considered fair within its peer group in the industrial manufacturing sector. This valuation reflects a discount compared to historical averages for similar companies, suggesting that the market is pricing in the company’s recent underperformance and financial risks.

While the stock price currently stands at ₹179.00, down from its 52-week high of ₹363.90, this discount could present an opportunity for value-oriented investors if the company manages to stabilise its earnings and improve operational metrics. However, the negative profit growth of -5.8% over the past year tempers enthusiasm, indicating that the valuation remains justified by the company’s recent results.

Financial Trend: Negative Performance Clouds Outlook

The financial trend for Loyal Equipments has deteriorated over the latest reporting periods. The company posted negative results in the quarter ending December 2025, with profit after tax (PAT) declining by 52.97% to ₹2.85 crores and profit before tax (PBT) falling by 33.88% to ₹2.01 crores. These figures highlight significant earnings pressure and raise concerns about the company’s near-term profitability.

Moreover, the stock has underperformed the broader market substantially. While the BSE500 index generated returns of 11.06% over the last year, Loyal Equipments recorded a negative return of -18.26%. This divergence underscores the challenges the company faces in regaining investor confidence and market momentum.

Technical Analysis: Shift from Bearish to Mildly Bearish Signals

The primary catalyst for the upgrade in investment rating is the improvement in technical indicators. The technical grade has shifted from bearish to mildly bearish, reflecting a subtle but meaningful change in market sentiment. Key technical metrics present a mixed but cautiously optimistic picture:

• MACD: Weekly readings have turned mildly bullish, although monthly signals remain mildly bearish, indicating short-term momentum improvement.
• RSI: Both weekly and monthly relative strength index (RSI) readings show no clear signal, suggesting a neutral momentum environment.
• Bollinger Bands: Weekly and monthly bands remain mildly bearish, signalling continued volatility and potential downward pressure.
• Moving Averages: Daily moving averages are still bearish, reflecting the recent price weakness.
• KST (Know Sure Thing): Weekly KST is mildly bullish, while monthly KST remains mildly bearish, reinforcing the mixed technical outlook.
• Dow Theory: Weekly charts show no definitive trend, whereas monthly charts remain mildly bearish.

Overall, these technical signals suggest that while the stock is not yet in a strong uptrend, the worst of the bearish momentum may be easing. This technical improvement has been sufficient to prompt a rating upgrade from Strong Sell to Sell, signalling a cautious but less negative stance.

Stock Performance Relative to Market Benchmarks

Examining Loyal Equipments’ returns over various time horizons reveals a complex performance profile. The stock has delivered exceptional long-term gains, with a 10-year return of 1,022.26% compared to the Sensex’s 259.46%, and a 5-year return of 474.64% versus the Sensex’s 60.30%. This highlights the company’s historical ability to generate substantial shareholder value over extended periods.

However, recent performance has been disappointing. The stock’s 1-year return of -18.26% starkly contrasts with the Sensex’s positive 8.52%, and the year-to-date return is down 7.40% against the Sensex’s -3.04%. Even on a one-month basis, the stock has declined by 6.67%, underperforming the Sensex’s 1.20% drop. These figures underscore the challenges Loyal Equipments faces in the current market environment.

Market Capitalisation and Trading Activity

Loyal Equipments holds a market capitalisation grade of 4, reflecting its status as a micro-cap stock within the industrial manufacturing sector. The stock’s price has shown modest intraday gains recently, with a day change of 1.02% and a current price of ₹179.00, up from the previous close of ₹177.20. The trading range today has been between ₹175.00 and ₹181.90, indicating some buying interest despite the broader negative sentiment.

Its 52-week low stands at ₹155.00, while the 52-week high was ₹363.90, illustrating significant volatility and a wide trading range over the past year. This volatility is consistent with the mixed technical signals and financial uncertainties surrounding the company.

Outlook and Investor Considerations

While the upgrade to Sell from Strong Sell signals a modest improvement in technical conditions, investors should remain cautious given the company’s ongoing financial headwinds and market underperformance. The negative earnings trend, combined with bearish moving averages and mixed momentum indicators, suggests that Loyal Equipments is still navigating a challenging phase.

However, the company’s strong management efficiency and fair valuation relative to peers provide some support for a potential recovery if operational performance improves. Long-term investors may find value in the stock’s attractive discount and historical outperformance, but near-term risks remain elevated.

In summary, the revised rating reflects a balanced view: technical indicators have improved enough to reduce the severity of the sell recommendation, but fundamental and financial concerns continue to weigh on the stock’s outlook.

Summary of Ratings and Scores

Loyal Equipments currently holds a Mojo Score of 31.0, with a Mojo Grade of Sell, upgraded from Strong Sell on 14 February 2026. The market capitalisation grade stands at 4, consistent with its micro-cap status. The technical grade improvement was the primary driver behind the rating change, while quality and valuation metrics remain stable but cautious. Financial trends continue to deteriorate, limiting upside potential in the near term.

Final Thoughts

For investors tracking Loyal Equipments Ltd, the recent upgrade offers a signal that the stock’s technical outlook is stabilising, but it is not yet out of the woods. Careful monitoring of upcoming quarterly results and technical momentum will be essential to reassess the company’s trajectory. Given the mixed signals, a Sell rating remains appropriate, reflecting a cautious stance amid ongoing uncertainties.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →