Mawana Sugars Downgraded to 'Sell' by MarketsMOJO Due to Poor Financial Performance and Bearish Trend

Mawana Sugars, a microcap company in the sugar industry, has recently been downgraded to a 'Sell' by MarketsMOJO on 2024-05-13. This decision was based on several factors, including the company's low ability to service debt with a high Debt to EBITDA ratio of 3.41 times. Additionally, the company has shown poor long-term growth with only a 2.83% annual increase in Net Sales over the last 5 years. This has resulted in a low Return on Equity (avg) of 2.96%, indicating low profitability per unit of shareholders' funds.
Technically, the stock is currently in a Bearish range and has been deteriorating since 13-May-24. The Bollinger Band and KST technical factors also suggest a Bearish trend. Furthermore, Mawana Sugars has underperformed the market (BSE 500) in the last year, generating negative returns of -0.51% while the market has seen a 31.64% increase.

However, there are some positive factors to consider. The company has shown healthy long-term growth with an annual increase of 34.99% in Operating profit. In December 2023, Mawana Sugars reported positive results with PBT LESS OI(Q) at Rs 28.66 cr, growing at 1590.9%, and PAT(Q) at Rs 17.61 cr, growing at 128.9%. The company also has a high ROCE (HY) of 11.77%, indicating strong returns on capital employed.

In terms of valuation, Mawana Sugars is currently trading at a discount compared to its average historical valuations. Its ROCE of 6.8 also suggests a Very Attractive valuation with a 1 Enterprise value to Capital Employed. Additionally, while the stock has generated negative returns in the past year, its profits have increased by 1109.6%, resulting in a PEG ratio of 0.

It is worth noting that the majority shareholders of Mawana Sugars are the promoters, which may impact the company's decision-making and future performance. Overall, while there are some positive aspects to consider, the current financial and technical indicators suggest that Mawana Sugars may not be a strong investment option at this time. Investors are advised to carefully evaluate all factors before making any decisions.