MarketsMOJO Downgrades Chemplast Sanmar to 'Sell' Due to High Debt and Poor Growth

Chemplast Sanmar, a midcap chemical company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 18, 2024. This decision was based on several factors, including the company's high debt to EBITDA ratio of 9.63 times, indicating a low ability to service debt. Additionally, the company has shown poor long-term growth with a decline in net sales and operating profit over the last 5 years.
In the latest quarter, the company's operating cash flow was at its lowest at Rs -244.93 Cr, and its return on capital employed (ROCE) was also at its lowest at -1.39%. The debt-equity ratio was also at its highest at 0.91 times. With a ROCE of -5.1, the company's valuation is considered very expensive with an enterprise value to capital employed ratio of 3.4. The stock is currently trading at a premium compared to its historical valuations.

In the past year, the stock has underperformed the market, generating a return of only 0.79%, while the market (BSE 500) has seen a return of 34.39%. This indicates a decline in profits by -247.7%.

On the positive side, Chemplast Sanmar has shown high management efficiency with a ROCE of 32.47%. However, the technical trend for the stock is currently sideways, with no clear price momentum. The Bollinger Band and KST technical factors also show a sideways trend.

It is worth noting that the company has a high institutional holding of 39.66%, indicating that these investors have better resources and capabilities to analyze the company's fundamentals. Their stake has also increased by 0.68% in the previous quarter.

In conclusion, based on the current financial and technical factors, MarketsMOJO has downgraded the stock call on Chemplast Sanmar to 'Sell'. Investors should carefully consider these factors before making any investment decisions.