MarketsMOJO Downgrades Hatsun Agro Product Ltd to Sell Amid Mixed Financials and Bearish Technicals

Quality Assessment: Solid Financial Performance Amidst Market Challenges

Hatsun Agro continues to demonstrate robust financial health, as evidenced by its Q2 FY25-26 results. The company reported a profit before tax (PBT) excluding other income of ₹143.27 crores, marking a substantial growth of 77.14% year-on-year. Net profit (PAT) also surged by 70.3% to ₹109.54 crores, reflecting operational efficiency and strong demand in the FMCG sector. The operating profit to interest ratio stands at a healthy 8.66 times, indicating comfortable coverage of interest expenses.

Return on capital employed (ROCE) remains respectable at 16.7%, signalling effective utilisation of capital resources. These metrics underscore Hatsun Agro’s quality fundamentals, which remain a positive factor despite recent market headwinds.

Valuation: Fair but Discounted Relative to Peers

The company’s valuation metrics present a mixed picture. With an enterprise value to capital employed ratio of 5.9, Hatsun Agro is trading at a discount compared to its FMCG peers’ historical averages. This suggests some value opportunity for investors willing to look beyond short-term volatility. However, the price-to-earnings growth (PEG) ratio of 3.2 indicates that the stock’s price growth is not fully justified by its earnings growth, signalling potential overvaluation concerns.

Current market price stands at ₹930.55, down from the previous close of ₹946.85, and significantly below its 52-week high of ₹1,178.80. The stock’s 52-week low is ₹817.05, showing a wide trading range and volatility over the past year.

Financial Trend: Positive Earnings Growth but Lagging Returns

While Hatsun Agro’s profits have risen by 17.9% over the past year, the stock’s price performance has been disappointing. It generated a negative return of -0.58% over the last 12 months, underperforming the BSE500 index and the broader Sensex, which returned 9.56% over the same period. Over the last three years, the stock’s cumulative return of 4.47% pales in comparison to the Sensex’s 38.78% gain, highlighting a persistent lag in market performance.

This underperformance extends to shorter time frames as well, with the stock falling 3.21% in the past week and 8.82% over the last month, both significantly worse than the Sensex’s respective returns of -1.69% and -1.92%. Such trends have raised concerns about the stock’s momentum and investor sentiment.

Technical Analysis: Shift to Mildly Bearish Signals

The most significant factor driving the downgrade to a Sell rating is the deterioration in technical indicators. The technical trend has shifted from sideways to mildly bearish, signalling weakening price momentum. Key technical metrics reveal a mixed but predominantly negative outlook:

• MACD: Weekly readings are mildly bearish, although monthly data remain mildly bullish, indicating short-term weakness amid longer-term resilience.


• RSI: Both weekly and monthly relative strength index readings show no clear signal, suggesting a lack of strong directional momentum.


• Bollinger Bands: Both weekly and monthly bands are bearish, reflecting increased volatility and downward pressure on prices.


• Moving Averages: Daily moving averages remain mildly bullish, but this is insufficient to offset broader bearish trends.


• KST (Know Sure Thing): Weekly readings are mildly bearish, with monthly indicators also bearish, reinforcing the negative momentum.


• Dow Theory: Both weekly and monthly trends are mildly bearish, indicating a potential downtrend in price action.


• On-Balance Volume (OBV): No clear trend on weekly or monthly charts, suggesting volume is not confirming price moves.

These technical signals collectively point to a weakening market stance for Hatsun Agro, justifying the downgrade in the technical grade and overall Mojo Grade from Hold to Sell.

Market Capitalisation and Shareholding

Hatsun Agro holds a market cap grade of 3, reflecting its mid-sized presence within the FMCG sector. The majority shareholding remains with promoters, which typically provides stability but also concentrates control. The stock’s recent day change was negative at -1.72%, further underscoring the current bearish sentiment among investors.

Conclusion: Balancing Strong Fundamentals Against Market Realities

Hatsun Agro Product Ltd presents a complex investment case. On one hand, the company’s financial performance remains strong, with impressive profit growth and solid capital returns. Its valuation metrics suggest a reasonable price relative to peers, and the promoter holding provides a degree of stability.

On the other hand, the stock’s persistent underperformance relative to the Sensex and BSE500 indices over multiple time frames, combined with a shift to bearish technical trends, has eroded investor confidence. The downgrade to a Sell rating by MarketsMOJO reflects these concerns, signalling caution for investors considering exposure to this FMCG stock at present.

Investors should weigh the company’s fundamental strengths against the prevailing technical weakness and market sentiment before making allocation decisions. Monitoring upcoming quarterly results and technical developments will be crucial to reassessing the stock’s outlook in the near term.

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