MarketsMOJO downgrades Samhi Hotels to 'Sell' due to weak fundamentals and technical outlook

Samhi Hotels, a smallcap company in the hotel, resort, and restaurant industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 18, 2024. This decision was based on several factors that indicate weak long-term fundamental strength for the company.
One of the main reasons for the downgrade is the company's average Return on Capital Employed (ROCE) of 5.07%, which is considered low. Additionally, the company has shown poor long-term growth with an annual rate of 8.04% in operating profit over the last 5 years. This is further compounded by a high Debt to EBITDA ratio of 7.41 times, indicating a low ability to service debt.

From a technical standpoint, the stock is currently in a Mildly Bearish range and has recently deteriorated from a Mildly Bullish trend. Multiple factors, such as RSI, MACD, and Bollinger Band, suggest a bearish outlook for the stock.

Furthermore, the company's valuation is considered expensive with an Enterprise value to Capital Employed ratio of 1.9. While the stock has generated a return of 13.61% in the past year, its profits have only risen by 55%, indicating underperformance compared to the market (BSE 500) returns of 26.29%.

However, there are some positive factors to consider. Samhi Hotels declared outstanding results in September 2024, with a growth in net profit of 198.35%. The company has also shown positive results for the last 4 consecutive quarters, with the highest operating cash flow of Rs 274.69 Cr and a 25.59% growth in net sales in the last half-year. Additionally, the company has a high institutional holding of 78.05%, indicating that these investors have better resources and capabilities to analyze the company's fundamentals.

In conclusion, while Samhi Hotels has shown some positive results in the recent past, the overall weak long-term fundamental strength and technical outlook suggest a 'Sell' call for the stock. Investors should carefully consider these factors before making any investment decisions.