Manaksia Aluminium Company Ltd Upgraded to Sell on Technical Improvements Despite Financial Challenges

Quality Assessment: Struggling Profitability Amid Debt Concerns

Manaksia Aluminium operates within the Non-Ferrous Metals sector, a space characterised by cyclical demand and commodity price volatility. The company’s quality metrics remain subdued, with an average Return on Equity (ROE) of just 4.15%, signalling limited profitability relative to shareholders’ funds. This low ROE highlights challenges in generating adequate returns on invested capital.

Financially, the firm’s ability to service debt is a significant concern. The Debt to EBITDA ratio stands at a high 5.25 times, indicating a stretched balance sheet and potential liquidity risks. Operating cash flow for the year is notably low at ₹0.97 crore, underscoring cash generation difficulties. Quarterly net sales have declined by 6.6% to ₹131.21 crore, while PBDIT has dropped to ₹10.81 crore, the lowest in recent quarters. These factors collectively weigh on the company’s quality grade, justifying a cautious stance despite some operational improvements.

Valuation: Attractive Metrics Amidst Discounted Pricing

Despite the financial challenges, Manaksia Aluminium’s valuation metrics present a more encouraging picture. The company’s Return on Capital Employed (ROCE) is a respectable 9.8%, suggesting efficient use of capital relative to earnings before interest and tax. The Enterprise Value to Capital Employed ratio is 1.2, indicating the stock is trading at a discount compared to its peers’ historical valuations.

Moreover, the company’s Price/Earnings to Growth (PEG) ratio stands at 1.4, reflecting a reasonable balance between valuation and earnings growth prospects. Over the past year, profits have increased by 21.8%, even as the stock price declined by 8.81%. This divergence suggests that the market may be undervaluing the company’s earnings momentum, offering a potential entry point for value-oriented investors.

Financial Trend: Mixed Signals with Long-Term Growth but Recent Weakness

Manaksia Aluminium’s financial trend presents a complex narrative. While the latest quarterly results for Q2 FY25-26 show negative performance, including falling sales and operating profits, the company has demonstrated healthy long-term growth. Operating profit has grown at an annual rate of 49.24%, signalling underlying operational improvements over time.

However, the stock’s recent returns have been disappointing. Over the last year, the stock has declined by 8.81%, underperforming the BSE Sensex, which gained 9.06% over the same period. Similarly, the stock has lagged the BSE500 index over three years and shorter time frames. This underperformance reflects near-term challenges despite the company’s improving profit trajectory.

Technical Analysis: Key Driver Behind Upgrade

The primary catalyst for the upgrade from Strong Sell to Sell is the improvement in technical indicators. The technical grade has shifted from bearish to mildly bearish, signalling a potential stabilisation in the stock’s price trend. Key technical signals include a bullish monthly MACD and Bollinger Bands on both weekly and monthly charts, suggesting upward momentum in the medium term.

While the daily moving averages remain mildly bearish, weekly indicators such as the Dow Theory and On-Balance Volume (OBV) have turned mildly bullish, indicating growing buying interest. The Relative Strength Index (RSI) remains neutral with no clear signal, but the overall technical picture points to a less negative outlook than before.

On 1 January 2026, the stock closed at ₹28.89, up 4.98% from the previous close of ₹27.52. The 52-week range is ₹17.76 to ₹34.80, with the current price closer to the upper end, reflecting recent positive momentum. Weekly and monthly technical indicators suggest the stock may be poised for a modest recovery, justifying the rating upgrade despite fundamental concerns.

Stock Performance Relative to Benchmarks

Examining returns over various periods highlights the stock’s mixed performance. Over one week and one month, Manaksia Aluminium outperformed the Sensex significantly, with returns of 13.34% and 15.47% respectively, compared to marginal negative returns for the benchmark. However, year-to-date and one-year returns remain negative at -8.81%, contrasting with Sensex gains of 9.06%.

Longer-term returns are more favourable, with the stock delivering 33.75% over three years and an impressive 240.28% over five years, substantially outperforming the Sensex’s 78.47% over the same period. Over ten years, the stock has returned nearly 399%, well above the Sensex’s 226.3%. These figures underscore the company’s potential for long-term wealth creation despite short-term volatility.

Promoter Confidence and Ownership

Another positive factor supporting the upgrade is rising promoter confidence. Promoters have increased their stake by 2.01% in the previous quarter, now holding 74.87% of the company’s equity. This increased ownership signals strong faith in the company’s future prospects and aligns management’s interests with those of shareholders.

Conclusion: Balanced Outlook with Technical Optimism but Fundamental Caution

Manaksia Aluminium Company Ltd’s upgrade from Strong Sell to Sell reflects a nuanced assessment of its investment profile. While financial metrics such as profitability, debt servicing ability, and recent quarterly performance remain weak, the company’s valuation is attractive relative to peers, and long-term profit growth is encouraging.

The decisive factor behind the rating change is the improvement in technical indicators, which have shifted from bearish to mildly bearish, signalling a potential bottoming out of the stock price. Rising promoter confidence further supports a cautiously optimistic outlook.

Investors should weigh the company’s operational challenges and high leverage against its discounted valuation and improving technical signals. The stock’s recent outperformance over short-term periods and strong long-term returns suggest potential for recovery, but risks remain elevated given the company’s financial constraints.

Overall, the Sell rating reflects a moderate upgrade that recognises technical progress while maintaining caution on fundamental weaknesses. Investors seeking exposure to the Non-Ferrous Metals sector may consider this stock as a speculative opportunity, but should remain vigilant on debt levels and quarterly earnings trends.

Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Saving Now →