MarketsMOJO Upgrades Hatsun Agro Product Ltd to Hold on Improved Technicals and Financials

Technical Trends Shift to Neutral Territory

The primary catalyst for the rating upgrade lies in the technical analysis of Hatsun Agro’s stock price movements. Previously characterised by a mildly bearish outlook, the technical trend has now shifted to a sideways pattern, indicating a pause in downward momentum and potential consolidation. Key technical indicators present a nuanced picture: the Moving Average Convergence Divergence (MACD) remains bearish on both weekly and monthly charts, suggesting some lingering selling pressure. However, the daily moving averages have turned mildly bullish, signalling short-term buying interest.

Other momentum indicators such as the Relative Strength Index (RSI) show no clear signal on weekly or monthly timeframes, while Bollinger Bands continue to reflect mild bearishness. The Know Sure Thing (KST) indicator presents a mixed view with a mildly bearish weekly reading but a mildly bullish monthly stance. Dow Theory assessments also reveal a mildly bearish weekly trend but no definitive monthly trend. On balance, these technical signals justify a more cautious but improved stance, moving away from outright sell recommendations.

Today, the stock traded in a range between ₹885.40 and ₹915.00, closing at ₹897.55, up 1.38% from the previous close of ₹885.30. This modest uptick supports the technical narrative of stabilisation after recent volatility.

Financial Performance Strengthens Investment Case

Hatsun Agro’s financial trend has been a significant factor in the upgrade. The company has reported positive results for three consecutive quarters, underscoring operational resilience in the competitive FMCG sector. In the third quarter of FY25-26, the company posted a Profit Before Tax (PBT) excluding other income of ₹75.96 crores, marking a robust growth of 42.19% year-on-year. Net Profit After Tax (PAT) for the quarter stood at ₹60.58 crores, up 48.0% compared to the same period last year.

Return on Capital Employed (ROCE) for the half-year reached a peak of 17.00%, reflecting efficient capital utilisation. The company’s ROCE for the latest period is 16.7%, which, combined with an Enterprise Value to Capital Employed (EV/CE) ratio of 5.7, indicates a fair valuation relative to its earnings power. This valuation is attractive when compared to peers, as Hatsun Agro is trading at a discount to the average historical valuations within the FMCG sector.

Despite the positive earnings trajectory, the stock’s price performance has lagged broader market benchmarks. Over the past year, Hatsun Agro’s share price has declined by 11.05%, while the Sensex gained 8.49%. The company’s three-year return of 2.25% also pales in comparison to the Sensex’s 37.63% gain over the same period. This underperformance is partly attributed to sector rotation and broader market volatility but is offset by a 33.7% increase in profits over the last year, resulting in a PEG ratio of 1.5. This suggests that the stock’s earnings growth is not fully reflected in its current price.

Valuation and Quality Metrics Support Hold Rating

Hatsun Agro’s valuation metrics and quality scores underpin the Hold rating. The company’s Mojo Score stands at 51.0, an improvement from the previous Sell grade, reflecting a more balanced risk-reward profile. The Market Cap Grade is 3, indicating a mid-sized market capitalisation relative to its sector peers. The company’s promoter holding remains majority, providing stability and alignment with shareholder interests.

While the stock is trading below its 52-week high of ₹1,178.80, it remains comfortably above its 52-week low of ₹817.05, suggesting a degree of price support. The current price of ₹897.55 is positioned within this range, consistent with the sideways technical trend. Investors should note that the stock’s consistent underperformance against the BSE500 index over the last three years warrants caution, but the improving fundamentals and technical stabilisation justify a neutral stance rather than a sell recommendation.

Comparative Returns and Market Context

Examining Hatsun Agro’s returns relative to the Sensex and broader market indices provides further insight. The stock outperformed the Sensex marginally over the past week, delivering a 2.53% gain versus the Sensex’s 2.30%. However, over the one-month and year-to-date periods, the stock has underperformed significantly, with returns of -8.24% and -8.07% respectively, compared to the Sensex’s -2.36% and -1.74%. This trend extends to longer horizons, where the stock’s five-year return of 27.45% trails the Sensex’s 66.63%, though the ten-year return of 322.71% notably exceeds the Sensex’s 245.70%, highlighting the company’s long-term growth potential.

These mixed returns reflect sector-specific challenges and market rotations but also suggest that the stock may be undervalued in the near term given its improving fundamentals and technical signals.

Outlook and Investment Considerations

In summary, the upgrade of Hatsun Agro Product Ltd’s rating to Hold is driven by a combination of stabilising technical indicators and a solid financial performance that has demonstrated resilience in a competitive FMCG environment. The company’s consistent quarterly profit growth, attractive ROCE, and fair valuation metrics support a more cautious but optimistic outlook.

Investors should weigh the stock’s recent underperformance against broader indices and sector peers against its improving earnings trajectory and technical consolidation. The Hold rating reflects a balanced view that the stock is no longer a sell but requires monitoring for further confirmation of upward momentum before considering a Buy recommendation.

Market participants are advised to keep an eye on upcoming quarterly results and technical developments, particularly the MACD and moving averages, which will provide clearer signals on the stock’s directional bias in the medium term.

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