Manorama Industries Ltd Downgraded to Hold Amid Technical Weakness Despite Strong Fundamentals

Quality Assessment: Strong Operational Efficiency and Consistent Growth

Manorama Industries continues to demonstrate high management efficiency, reflected in its impressive Return on Capital Employed (ROCE) of 17.22% for the recent quarter. This figure underscores the company’s ability to generate substantial returns from its capital base, a critical quality metric for investors. The company has also maintained a consistent track record of positive quarterly results, with the latest quarter (Q2 FY25-26) reporting net sales of ₹323.31 crores, marking the highest quarterly sales to date.

Operating profit margins have surged, with operating profit growing at an annualised rate of 72.60%, while net sales have expanded at 42.10% annually. The operating profit to interest coverage ratio stands at a robust 10.08 times, indicating strong earnings relative to debt servicing costs. These factors collectively contribute to a high-quality operational profile, supporting the company’s long-term growth prospects.

Valuation: Expensive Yet Discounted Relative to Peers

Despite the strong fundamentals, Manorama Industries is currently trading at a relatively expensive valuation. The company’s ROCE of 29.2% and an Enterprise Value to Capital Employed (EV/CE) ratio of 9.3 suggest a premium pricing compared to the broader market. However, when benchmarked against its peers’ historical valuations, the stock is trading at a discount, offering some valuation comfort to investors.

Moreover, the company’s Price/Earnings to Growth (PEG) ratio is an attractive 0.2, signalling that the stock’s price growth is undervalued relative to its earnings growth. Over the past year, profits have risen by an extraordinary 194.5%, while the stock price has appreciated by 24.91%, outperforming the BSE500 index and the Sensex, which returned 9.06% over the same period.

Financial Trend: Robust Growth and Consistent Returns

Manorama Industries has delivered outstanding financial results over the last several quarters, with five consecutive quarters of positive earnings growth. The company’s net sales increased by 11.66% in the most recent quarter, while operating profit margins have expanded significantly. This strong financial trend is further supported by the company’s long-term return profile, with a remarkable 552.39% return over three years and an exceptional 980.86% return over five years, vastly outperforming the Sensex’s 40.07% and 78.47% returns respectively over the same periods.

Year-to-date and one-year returns stand at 24.91%, nearly three times the Sensex’s 9.06% return, highlighting the stock’s superior performance. These figures reflect the company’s ability to sustain growth and generate shareholder value consistently.

Technicals: Shift to Bearish Signals Triggers Downgrade

Despite the strong fundamentals, the downgrade to Hold is primarily driven by a deterioration in technical indicators. The technical grade has shifted from mildly bearish to bearish, signalling caution for short- to medium-term investors. Key technical metrics reveal a mixed but predominantly negative outlook:

• MACD: Weekly readings are bearish, while monthly readings remain mildly bearish, indicating weakening momentum.


• RSI: Both weekly and monthly Relative Strength Index readings show no clear signal, suggesting a lack of strong directional momentum.


• Bollinger Bands: Weekly indicators are mildly bearish, though monthly bands remain bullish, reflecting some volatility and uncertainty.


• Moving Averages: Daily moving averages have turned bearish, reinforcing the short-term downtrend.


• KST (Know Sure Thing): Weekly readings are bearish, with monthly readings mildly bearish, further confirming weakening momentum.


• Dow Theory: Weekly trend is mildly bearish, while monthly trend shows no clear direction.


• On-Balance Volume (OBV): Both weekly and monthly OBV are mildly bearish, indicating declining buying pressure.

The stock’s current price stands at ₹1,334.00, up 2.21% on the day, with a 52-week high of ₹1,774.00 and a low of ₹736.15. Despite the recent uptick, the technical indicators suggest caution as the stock faces resistance and potential volatility ahead.

Additionally, institutional investor participation has declined, with a 1.06% reduction in stake over the previous quarter, now holding 6.97% collectively. This reduced institutional interest may reflect concerns over the stock’s near-term technical outlook despite strong fundamentals.

Comparative Performance and Market Context

Manorama Industries operates within the solvent extraction segment of the FMCG sector, a space characterised by steady demand and competitive pressures. The company’s stock has consistently outperformed the Sensex and BSE500 indices over multiple time horizons, underscoring its resilience and growth potential. However, the recent technical deterioration tempers enthusiasm, suggesting investors should weigh the strong financial and valuation metrics against the emerging technical risks.

Conclusion: Hold Rating Reflects Balanced View Amid Mixed Signals

In summary, Manorama Industries Ltd’s downgrade from Buy to Hold by MarketsMOJO on 31 Dec 2025 reflects a nuanced assessment of its investment merits. The company’s quality metrics and financial trends remain robust, with strong management efficiency, consistent earnings growth, and attractive valuation relative to peers. However, the shift to bearish technical indicators and declining institutional participation have introduced cautionary signals that cannot be ignored.

Investors are advised to monitor the stock’s technical developments closely while appreciating its long-term growth story. The Hold rating suggests a wait-and-watch approach, recognising the company’s strengths but acknowledging the risks posed by current market dynamics and technical trends.

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