Financial Performance Drives Upgrade
The primary catalyst behind the upgrade is the company’s improved financial trend, which shifted from flat to positive in the latest quarter ending December 2025. The financial score surged to 9 from a negative 1 over the preceding three months, reflecting a robust turnaround in profitability and operational efficiency.
Harrisons Malayalam reported a Profit Before Tax excluding Other Income (PBT LESS OI) of ₹3.93 crores for the quarter, representing a remarkable growth of 107.9% compared to the average of the previous four quarters. This surge underscores a strengthening core business performance, a critical factor for investors seeking sustainable earnings growth.
Return on Capital Employed (ROCE) for the half-year period reached a peak of 14.97%, signalling enhanced capital utilisation and operational leverage. Additionally, the Profit After Tax (PAT) for the nine months ended December 2025 rose to ₹20.02 crores, further affirming the company’s improving bottom line.
However, it is important to note that non-operating income remains a significant portion of profitability, constituting 48.56% of PBT. This reliance on non-core income streams introduces an element of caution, as it may not be sustainable in the long term.
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Valuation and Market Performance
Despite the positive financial momentum, Harrisons Malayalam’s valuation remains cautious. The company’s ROCE of 7.4% and an Enterprise Value to Capital Employed ratio of 1.5 suggest a fair valuation relative to peers. The stock currently trades at a discount compared to the average historical valuations of its sector counterparts.
Market performance over the past year has been disappointing, with the stock delivering a negative return of 25.45%, significantly underperforming the Sensex, which gained 10.41% over the same period. Over longer horizons, the stock’s returns have lagged broader market indices, with a 5-year return of 43.26% versus the Sensex’s 63.46%, and a 3-year return of 22.90% compared to the Sensex’s 38.81%.
These figures highlight the company’s challenges in delivering consistent shareholder value despite recent operational improvements.
Technical Indicators Signal Mild Improvement
The technical outlook for Harrisons Malayalam has also improved, contributing to the upgrade in investment rating. The technical trend has shifted from bearish to mildly bearish, reflecting a more balanced market sentiment.
Key technical indicators present a mixed but cautiously optimistic picture. The Moving Average Convergence Divergence (MACD) is mildly bullish on a weekly basis, though it remains bearish monthly. The Relative Strength Index (RSI) shows no clear signal on both weekly and monthly charts, indicating a neutral momentum.
Bollinger Bands and Moving Averages suggest a mildly bearish stance in the short term, while the KST oscillator remains bearish across weekly and monthly timeframes. Dow Theory analysis, however, indicates a mildly bullish weekly trend, though no definitive monthly trend is established.
Overall, these technical signals suggest that while the stock is not yet in a strong uptrend, the downward pressure has eased, providing a more stable base for potential recovery.
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Quality and Long-Term Fundamentals Remain a Concern
Despite the recent upgrade, Harrisons Malayalam’s overall quality rating remains low, reflected in its MarketsMOJO Mojo Score of 31.0 and a Mojo Grade of Sell, improved from a previous Strong Sell. The company’s market capitalisation grade stands at 4, indicating a mid-sized entity with moderate liquidity.
Long-term fundamental challenges persist, notably a negative compound annual growth rate (CAGR) of -15.88% in operating profits over the last five years. This decline underscores structural issues in the company’s core business that have yet to be fully addressed.
Additionally, the company’s debt servicing capacity is weak, with a high Debt to EBITDA ratio of 4.74 times, signalling elevated leverage and potential financial risk. Such a debt burden could constrain future growth initiatives and increase vulnerability to economic downturns.
Stock Price and Market Context
Harrisons Malayalam’s stock price closed at ₹164.75 on 12 February 2026, up 2.97% from the previous close of ₹160.00. The stock traded within a range of ₹163.05 to ₹166.70 during the day. Its 52-week high and low stand at ₹265.00 and ₹156.00 respectively, indicating significant volatility over the past year.
Comparatively, the stock has marginally outperformed the Sensex over the past week, with a 1.17% gain versus the benchmark’s 0.50%. However, over the last month and year-to-date periods, the stock’s returns have lagged slightly behind the Sensex.
These price movements reflect a cautious investor sentiment, balancing the company’s improving fundamentals against persistent long-term concerns.
Outlook and Investment Implications
In summary, the upgrade of Harrisons Malayalam Ltd’s investment rating to Sell from Strong Sell is driven by a combination of improved financial results, a more positive technical trend, and fair valuation metrics. The company’s recent quarterly performance, highlighted by strong profit growth and enhanced capital efficiency, provides a foundation for cautious optimism.
Nonetheless, investors should remain mindful of the company’s weak long-term fundamentals, high leverage, and reliance on non-operating income. The stock’s historical underperformance relative to the broader market and sector peers further tempers enthusiasm.
For investors considering exposure to the Industrial Products sector, Harrisons Malayalam represents a stock with improving but still challenged fundamentals. A Sell rating suggests that while the stock may offer some recovery potential, it is not yet positioned for a strong buy recommendation.
Majority Shareholding and Corporate Governance
The company’s majority shareholding remains with promoters, which can provide stability but also necessitates scrutiny of governance practices and strategic direction. Investors should monitor any developments in ownership structure or management initiatives that could impact future performance.
Conclusion
Harrisons Malayalam Ltd’s recent upgrade to a Sell rating reflects a nuanced view of the company’s prospects. Improved financial trends and technical signals have alleviated some concerns, yet significant challenges remain. Investors are advised to weigh these factors carefully and consider alternative opportunities within the sector and broader market.
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