Manaksia Ltd Stock Rating Upgraded to Sell Amid Mixed Financial and Technical Signals

Quality Assessment: Persistent Operational Struggles

Manaksia’s quality metrics continue to reflect challenges in operational performance. The company reported a disappointing quarter in Q2 FY25-26, with net sales exhibiting a negative compound annual growth rate (CAGR) of -0.43% over the past five years. Operating profit has declined at an even steeper annual rate of -3.79%, signalling deteriorating core profitability. The return on capital employed (ROCE) for the half-year period stands at a low 12.47%, underscoring inefficiencies in capital utilisation.

Profit after tax (PAT) for the recent quarter was ₹10.99 crores, marking a 21.2% decline compared to the average of the previous four quarters. Operating cash flow for the year plunged to a negative ₹7.80 crores, the lowest recorded in recent periods, indicating cash generation difficulties. These factors collectively contribute to a subdued quality grade, reinforcing the company’s operational fragility despite the rating upgrade.

Valuation: Fair but Premium Relative to Peers

From a valuation standpoint, Manaksia presents a mixed picture. The stock trades at ₹63.75, marginally up 0.33% from the previous close of ₹63.54, but remains significantly below its 52-week high of ₹97.50. The price-to-book (P/B) ratio stands at 0.7, suggesting a fair valuation relative to its book value. Return on equity (ROE) is moderate at 8.3%, which aligns with the fair valuation assessment.

However, when compared to peer companies within the Iron & Steel Products sector, Manaksia’s stock is trading at a premium to historical averages. This premium valuation is somewhat at odds with the company’s negative financial trajectory and underperformance in returns, raising questions about the sustainability of current price levels. The stock’s underperformance relative to the BSE500 index over the last three years and one year further complicates the valuation narrative.

Financial Trend: Negative Momentum Persists

Financial trends for Manaksia remain largely negative, with the stock delivering a one-year return of -23.52%, starkly contrasting with the Sensex’s 8.21% gain over the same period. Year-to-date returns are similarly weak at -23.30%, while the three-year return of -14.37% pales in comparison to the Sensex’s robust 39.17% growth.

Profitability has also deteriorated, with profits falling by 40.5% over the past year. Despite a low average debt-to-equity ratio of zero, which indicates minimal leverage risk, the company’s earnings and cash flow metrics have not shown signs of recovery. This sustained negative financial trend weighs heavily on the investment thesis, limiting upside potential despite technical improvements.

Technical Analysis: Signs of Stabilisation and Mild Improvement

The primary driver behind the upgrade from Strong Sell to Sell is the shift in technical indicators, which have moved from a strongly bearish stance to a mildly bearish or neutral outlook. Weekly and monthly Moving Average Convergence Divergence (MACD) remain bearish, but the Relative Strength Index (RSI) on a monthly basis has turned bullish, signalling some underlying momentum.

Bollinger Bands continue to show mild bearishness on both weekly and monthly charts, yet the KST (Know Sure Thing) indicator has improved to mildly bullish on a monthly timeframe. Dow Theory analysis presents a mixed picture, mildly bullish weekly but mildly bearish monthly, reflecting short-term optimism tempered by longer-term caution.

On-balance volume (OBV) readings are mildly bullish across weekly and monthly periods, suggesting that buying interest is gradually increasing. Daily moving averages remain bearish, indicating that the short-term trend has yet to fully reverse. Overall, these technical signals justify a cautious upgrade, recognising that while fundamentals remain weak, market sentiment is showing tentative signs of improvement.

Comparative Performance and Shareholding Structure

Manaksia’s stock price has shown limited volatility today, trading between ₹62.01 and ₹63.88, closing near ₹63.75. The 52-week low of ₹54.59 and high of ₹97.50 highlight the stock’s wide trading range and recent weakness. The company’s returns over longer horizons remain disappointing, with a five-year return of 8.23% versus the Sensex’s 77.34%, and a ten-year return of 33.65% compared to the Sensex’s 226.18%.

The majority shareholding remains with promoters, which can provide some stability but also concentrates control. The company operates within the Aluminium & Aluminium Products industry, a sector that has seen mixed performance amid global commodity price fluctuations and domestic demand uncertainties.

Conclusion: A Cautious Upgrade Reflecting Technical Recovery but Fundamental Concerns

Manaksia Ltd’s upgrade from Strong Sell to Sell by MarketsMOJO reflects a cautious acknowledgement of improving technical indicators amid a backdrop of persistent financial and operational challenges. While the company’s quality metrics and financial trends remain under pressure, the mild bullish signals in monthly RSI, KST, and OBV suggest that the stock may be stabilising after a prolonged downtrend.

Valuation remains fair but somewhat elevated relative to peers, and the company’s long-term growth prospects are subdued given negative sales and profit trends. Investors should weigh the technical improvements against the fundamental weaknesses before considering exposure. The current rating signals a tentative step towards recovery rather than a definitive turnaround.

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