LWS Knitwear Ltd Downgraded to Strong Sell Amid Weak Fundamentals and Bearish Technicals

Quality Assessment: Weakening Fundamentals and Debt Concerns

LWS Knitwear’s quality metrics continue to disappoint investors. The company’s average Return on Capital Employed (ROCE) stands at a modest 7.21%, signalling limited efficiency in generating returns from its capital base. This figure is below industry averages and raises concerns about the firm’s long-term profitability. Furthermore, the company’s ability to service its debt is under strain, with a high Debt to EBITDA ratio of 5.96 times, indicating significant leverage and potential liquidity risks.

The recent quarterly results for Q3 FY25-26 underscore these challenges. Net sales fell sharply by 36.7% to ₹17.68 crores compared to the previous four-quarter average, highlighting operational difficulties. Additionally, the Debtors Turnover Ratio for the half-year is at a low 2.47 times, suggesting inefficiencies in receivables management and potential cash flow constraints.

These factors collectively contribute to the company’s weak fundamental strength, justifying the downgrade in quality grading and signalling caution for investors seeking stable earnings and financial health.

Valuation: Attractive but Reflective of Underperformance

Despite the weak fundamentals, LWS Knitwear’s valuation metrics present a somewhat attractive picture. The company’s ROCE of 10.8% on a trailing basis, combined with an Enterprise Value to Capital Employed ratio of 0.8, indicates that the stock is trading at a discount relative to its capital base. This valuation discount is further supported by the stock’s current price of ₹14.55, which is significantly below its 52-week high of ₹22.50.

However, this valuation attractiveness is tempered by the company’s underwhelming performance relative to peers and benchmarks. Over the past year, the stock has generated a negative return of -16.38%, underperforming the BSE500 index and its sector peers. Profitability has also declined by 1.9% over the same period, reflecting operational headwinds that may limit the stock’s upside potential despite its low valuation multiples.

Financial Trend: Flat to Negative Performance Signals Caution

The financial trend for LWS Knitwear remains flat to negative, with the latest quarterly results confirming a lack of growth momentum. The company’s net sales contraction of 36.7% in Q3 FY25-26 is a stark indicator of operational challenges. Profit margins have also been under pressure, with a 1.9% decline in profits over the past year.

Longer-term returns paint a mixed picture. While the stock has delivered impressive cumulative returns of 466.15% over five years and 889.80% over ten years, recent performance has faltered. The stock’s one-year return of -16.38% contrasts sharply with the Sensex’s positive 8.64% return over the same period. Similarly, the three-year return of 11.49% lags behind the Sensex’s 35.24% gain, signalling underperformance in recent years.

These trends suggest that while the company has demonstrated strong long-term growth, near-term financial performance is disappointing, warranting a cautious stance from investors.

Technical Analysis: Shift to Bearish Signals

The downgrade to Strong Sell is largely driven by a deterioration in technical indicators. The technical grade has shifted from mildly bearish to outright bearish, reflecting a negative market sentiment and weakening price momentum.

Key technical signals include:

• MACD: Weekly readings remain mildly bullish, but the monthly MACD is bearish, indicating longer-term downward momentum.
• RSI: Both weekly and monthly Relative Strength Index readings show no clear signal, suggesting indecision but no immediate bullish momentum.
• Bollinger Bands: Both weekly and monthly bands are bearish, signalling increased volatility and downward pressure on prices.
• Moving Averages: Daily moving averages are bearish, confirming short-term weakness.
• KST (Know Sure Thing): Both weekly and monthly KST indicators are bearish, reinforcing the negative trend.
• Dow Theory: Weekly trend is mildly bearish, while monthly shows no clear trend, indicating uncertainty but a bias towards weakness.

Price action has reflected these signals, with the stock closing at ₹14.55 on 20 Feb 2026, down 5.52% from the previous close of ₹15.40. The stock’s 52-week low stands at ₹13.50, close to current levels, while the 52-week high was ₹22.50, highlighting the recent downtrend.

Comparative Performance: Underperforming Benchmarks

When compared to the broader market, LWS Knitwear’s returns have been disappointing. Over the past week and month, the stock has declined by 9.57% and 10.68% respectively, far exceeding the Sensex’s modest declines of 1.41% and 0.90%. Year-to-date, the stock has marginally gained 0.28%, but this pales in comparison to the Sensex’s 3.19% decline, reflecting relative weakness.

Over longer horizons, the stock’s underperformance is more pronounced. The one-year return of -16.38% contrasts with the Sensex’s 8.64% gain, while the three-year return of 11.49% lags behind the Sensex’s 35.24%. This persistent underperformance across multiple timeframes underscores the challenges facing LWS Knitwear and supports the Strong Sell rating.

Conclusion: Downgrade Reflects Multi-Parameter Weakness

The downgrade of LWS Knitwear Ltd to a Strong Sell rating by MarketsMOJO on 19 Feb 2026 is a comprehensive reflection of deteriorating fundamentals, unattractive financial trends, and bearish technical signals. Despite a valuation that appears inexpensive relative to capital employed, the company’s weak ROCE, high leverage, declining sales, and poor receivables management raise significant concerns.

Technical indicators have shifted decisively into bearish territory, with multiple momentum and trend-following tools signalling further downside risk. The stock’s recent price performance, including a 5.52% drop on the downgrade day and sustained underperformance against the Sensex and sector peers, reinforces the negative outlook.

Investors should approach LWS Knitwear with caution, considering the company’s challenges in both operational execution and market sentiment. The downgrade to Strong Sell is a clear signal that the stock currently lacks the quality and momentum to justify a more favourable rating.

Shareholding and Industry Context

The majority shareholding remains with promoters, which can be a double-edged sword depending on governance and strategic direction. Operating within the Textile industry under the Trading & Distributors sector, LWS Knitwear faces competitive pressures and sectoral headwinds that compound its internal challenges.

Summary of Ratings and Scores

MarketsMOJO’s current Mojo Score for LWS Knitwear stands at 26.0, with a Mojo Grade of Strong Sell, downgraded from Sell. The Market Cap Grade is 4, reflecting the company’s micro-cap status and associated liquidity and volatility risks.

Overall, the multi-parameter downgrade underscores the need for investors to reassess their exposure to LWS Knitwear amid a challenging operating and market environment.

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