MarketsMOJO Upgrades Nilkamal Stock to 'Hold' Amid Neutral Outlook and Strong Debt Management

On April 5, 2024, MarketsMOJO upgraded its stock call on Nilkamal, a smallcap company in the plastic products industry, to 'Hold'. This decision was based on several factors that indicate a neutral outlook for the company.

One of the main reasons for the 'Hold' rating is Nilkamal's strong ability to service debt. With a low Debt to EBITDA ratio of 0.59 times, the company is in a good position to manage its debt. Additionally, its ROCE of 11.5 and Enterprise value to Capital Employed ratio of 2 suggest a very attractive valuation.

Moreover, the stock is currently trading at a discount compared to its average historical valuations. While it has generated a return of 10.69% in the past year, its profits have increased by 27.6%. The PEG ratio of the company is also at a favorable level of 0.8.

However, there are some concerns regarding Nilkamal's long-term growth. Over the last 5 years, its Net Sales have grown at an annual rate of 8.94%, while its Operating profit has only increased by 4.76%. In addition, the company's results for December 2023 were flat, with a decrease in PBT LESS OI(Q) and PAT(Q) at -11.49% and -11.7%, respectively. The DEBTORS TURNOVER RATIO(HY) is also at its lowest level of 7.15 times.

From a technical standpoint, the stock is currently in a Mildly Bearish range. Factors such as RSI, MACD, and KST all point towards a bearish trend.

Furthermore, Nilkamal has underperformed the market in the last 1 year, with a return of 10.69% compared to the market's (BSE 500) return of 39.86%. This could be a cause for concern for investors.

It is worth noting that the company has a high institutional holding of 21.25%, indicating that these investors have better capabilities and resources to analyze the fundamentals of the company compared to retail investors.

In conclusion, while Nilkamal's stock has been upgraded to 'Hold', there are some concerns regarding its long-term growth and technical indicators. Investors should carefully consider these factors before making any investment decisions.