Makers Laboratories Ltd Upgraded to Sell on Improving Financial and Technical Trends

Financial Performance Drives Upgrade

The primary catalyst behind the upgrade is the company’s positive financial trend observed in the quarter ended December 2025. Makers Laboratories reported its highest-ever quarterly net sales of ₹35.67 crores, alongside a record PBDIT of ₹4.16 crores. This translated into an operating profit margin of 11.66%, the best in recent history for the firm. Profit before tax excluding other income also reached a peak of ₹2.82 crores, while quarterly PAT stood at ₹0.94 crores, with earnings per share hitting ₹1.59.

These figures represent a significant turnaround from the previous three months, where the financial trend was flat, and the financial score was zero. The current financial score has improved to 9, signalling a positive momentum in the company’s earnings trajectory. However, it is important to note that the nine-month PAT remains subdued at ₹1.26 crores, reflecting a steep decline of 84.86% year-on-year, which tempers the optimism somewhat.

Despite this quarterly improvement, Makers Laboratories continues to face challenges in its long-term fundamentals. The company’s operating profits have contracted at a compound annual growth rate (CAGR) of -15.78% over the past five years, and its average return on equity (ROE) remains low at 2.20%. This indicates limited profitability relative to shareholders’ funds, which is a concern for investors seeking sustainable growth.

Valuation and Market Performance

Valuation remains a sticking point for Makers Laboratories. The stock trades at a price-to-book value of 1.2, which is considered very expensive relative to its historical averages and peer group valuations. This premium valuation is difficult to justify given the company’s weak long-term profitability metrics and subdued return on equity.

Market performance over the past year has been disappointing. The stock has generated a negative return of -2.37%, underperforming the broader BSE500 index, which delivered 12.60% over the same period. Over five years, the stock’s return stands at -49.03%, starkly contrasting with the Sensex’s 62.34% gain. Even though the 10-year return of 139.69% is positive, it lags significantly behind the Sensex’s 264.02% appreciation.

Shorter-term returns have been more encouraging, with the stock posting a 17.63% gain over the past week and 26.74% over the last month, outperforming the Sensex’s modest 0.43% and -0.24% returns respectively. Year-to-date, Makers Laboratories has gained 23.95%, while the Sensex declined by 1.81%, reflecting recent positive momentum.

Technical Indicators Signal Stabilisation

The technical outlook for Makers Laboratories has also improved, contributing to the upgrade. The technical trend has shifted from mildly bearish to sideways, indicating a stabilisation in price action. Weekly MACD readings are mildly bullish, supported by bullish Bollinger Bands on both weekly and monthly charts. The Dow Theory signals are mildly bullish on both timeframes, suggesting a potential for further upward movement.

However, some indicators remain cautious. The monthly MACD and KST are bearish, and daily moving averages are mildly bearish, reflecting mixed signals. The relative strength index (RSI) on weekly and monthly charts shows no clear signal, indicating a neutral momentum environment. Overall, the technical picture suggests the stock is consolidating after recent gains, with potential for a breakout if positive financial trends continue.

Quality Assessment and Market Position

Makers Laboratories operates in the Pharmaceuticals & Biotechnology sector, a space characterised by intense competition and regulatory challenges. The company’s Mojo Score stands at 33.0, with a current Mojo Grade of Sell, upgraded from Strong Sell on 12 February 2026. The market capitalisation grade is 4, reflecting a mid-sized company with moderate liquidity.

Promoters remain the majority shareholders, providing stability in ownership. Despite recent quarterly improvements, the company’s weak long-term fundamentals and expensive valuation limit its appeal. The low average ROE and negative operating profit growth over five years highlight structural challenges that may constrain future profitability.

Summary and Outlook

The upgrade of Makers Laboratories Ltd’s investment rating to Sell reflects a nuanced view of the company’s current position. The recent quarterly financial results have demonstrated a clear improvement in sales, profitability, and operating margins, signalling a positive turnaround in the short term. Technical indicators corroborate this stabilisation, with several weekly and monthly signals turning bullish or neutral.

Nevertheless, the company’s long-term fundamentals remain weak, with declining operating profits over five years and a low return on equity. The valuation is stretched relative to peers and historical norms, and the stock has underperformed the broader market over the medium to long term. Investors should weigh these factors carefully, recognising that while the short-term outlook has improved, significant risks persist.

For those considering exposure to Makers Laboratories, the current Sell rating suggests caution. The company’s recent positive momentum may offer trading opportunities, but the structural challenges and valuation concerns limit its attractiveness as a long-term investment. Monitoring upcoming quarterly results and sector developments will be crucial to reassessing the company’s prospects going forward.

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