MarketsMOJO Downgrades Samhi Hotels to 'Sell' Due to Weak Fundamentals and High Debt Ratio

Samhi Hotels, a smallcap company in the hotel, resort, and restaurant industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 4, 2024. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 5.07%, poor long-term growth with an annual rate of 8.04% over the last 5 years, and a high Debt to EBITDA ratio of 7.41 times, indicating a low ability to service debt.
Additionally, the company's valuation is considered expensive with a 2 Enterprise value to Capital Employed and its profits have only risen by 55% while the stock has generated a return of 22% over the past year. On the positive side, Samhi Hotels declared very positive results in June 2024 with a growth in Operating Profit of 23.16% and has consistently declared positive results for the last 3 quarters. However, its PAT(Q) at Rs 4.23 cr has only grown at 110.5% and its NET SALES(HY) at Rs 529.05 cr has grown at 33.86%, indicating room for improvement.

From a technical standpoint, the trend for Samhi Hotels is currently sideways, with no clear price momentum. The technical trend has also deteriorated from mildly bullish on November 4, 2024, and has generated -2.99% returns since then. It is worth noting that the company has a high institutional holding at 78.05%, indicating that these investors have better capability and resources to analyze the fundamentals of companies compared to most retail investors.

In conclusion, while Samhi Hotels has shown some positive results in the past, its weak long-term fundamentals and high debt ratio have led to a 'Sell' rating from MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.