MarketsMOJO downgrades KNR Constructions to 'Hold' due to high debt and bearish trend

On April 18, 2024, MarketsMOJO downgraded its stock call on KNR Constructions to 'Hold' in the capital goods industry. This decision was based on the company's current performance and future potential.

Despite having a high management efficiency with a ROCE of 19.34%, KNR Constructions has been downgraded to 'Hold' due to its high debt to EBITDA ratio of 0.98 times. However, the company has shown healthy long-term growth with an annual operating profit growth rate of 25.99%. In addition, KNR Constructions has declared positive results for the last 5 consecutive quarters, with a PAT(Q) of Rs 139.61 crore, showing a growth of 99.7%.

Moreover, the company has a high DEBTORS TURNOVER RATIO(HY) of 21.29 times and a PBT LESS OI(Q) of Rs 157.57 crore, which has grown at a rate of 34.74%. With a ROCE of 19.3, KNR Constructions has a very attractive valuation with a 2.1 Enterprise value to Capital Employed. The stock is currently trading at a discount compared to its average historical valuations.

However, in the past year, while the stock has generated a return of 8.25%, its profits have risen by 38%, resulting in a PEG ratio of 0.3. Additionally, the company has a high institutional holding of 36.9%, indicating that these investors have better capability and resources to analyze the fundamentals of companies compared to retail investors.

From a technical standpoint, the stock is currently in a mildly bearish range, with the technical trend deteriorating from mildly bullish on April 18, 2024. Multiple factors, such as MACD, Bollinger Band, and KST, have contributed to the bearish trend.

Furthermore, KNR Constructions has underperformed the market in the last year, generating a return of 8.25%, significantly lower than the market (BSE 500) returns of 35.47%. Overall, while the company has shown strong potential for growth, its current debt situation and technical trend have led to a 'Hold' rating from MarketsMOJO.