Mangalam Drugs and Organics downgraded to 'Hold' by MarketsMOJO due to financial concerns

Mangalam Drugs and Organics, a microcap pharmaceutical company, has recently been downgraded to a 'Hold' by MarketsMOJO on October 3rd, 2024. This decision was based on various factors, including the company's financial performance and market trends.
Despite declaring positive results for the last three consecutive quarters, with a higher PAT (HY) of Rs 6.23 crore, the stock is currently in a mildly bullish range. Technical factors such as MACD and KST also indicate a bullish trend.

However, with a ROCE of 1.2, the company's valuation is considered attractive with an enterprise value to capital employed ratio of 1.2. Additionally, the stock is currently trading at a discount compared to its average historical valuations. Over the past year, the stock has generated a return of 18.50%, while its profits have risen by 128.1%. The PEG ratio of the company is also at a low of 0.5.

The majority shareholders of Mangalam Drugs and Organics are the promoters, indicating their confidence in the company. However, the company has a high debt to EBITDA ratio of 2.77 times, which may affect its ability to service debt in the long run. Furthermore, the company has a low return on equity (avg) of 8.64%, indicating low profitability per unit of shareholders' funds.

In terms of long-term growth, the company has underperformed with a net sales growth rate of 8.89% and operating profit growth rate of 1.43% over the last five years. This may be a cause for concern for investors.

In the last year, the stock has also underperformed the market, generating a return of 18.50% compared to the market (BSE 500) returns of 36.98%. This may be a factor in the downgrade of the stock to a 'Hold' by MarketsMOJO.

Overall, while Mangalam Drugs and Organics has shown positive results in the last few quarters, there are some concerns about its ability to service debt and its long-term growth potential. Investors may want to hold off on investing in this microcap company until there is more clarity on these issues.