Mawana Sugars downgraded to 'Sell' by MarketsMOJO due to weak fundamentals and underperformance

Mawana Sugars, a microcap company in the sugar industry, has recently been downgraded to a 'Sell' by MarketsMOJO on July 8th, 2024. This decision was based on several factors, including weak long-term fundamental strength, low ability to service debt, and underperformance in the market.
One of the main reasons for the downgrade is the company's weak operating profits, which have seen a negative CAGR growth of -7.52% over the last 5 years. Additionally, Mawana Sugars has a high debt to EBITDA ratio of 4.04 times, indicating a low ability to service its debt. The company's return on equity has also been low at 4.23%, showing a lack of profitability per unit of shareholders' funds.

In the past year, Mawana Sugars has generated a return of 17.18%, which is significantly lower than the market (BSE 500) returns of 37.98%. This underperformance in the market is another factor that led to the 'Sell' rating.

However, there are some positive factors to consider. The company has shown positive results in March 2024, with a significant growth in PBT LESS OI (Q) at Rs 62.17 crore, PAT (Q) at Rs 47.08 crore, and PBDIT (Q) at Rs 81.40 crore. The stock is also technically in a mildly bullish range, with its MACD and KST technical factors being bullish.

In terms of valuation, Mawana Sugars has a fair valuation with a ROCE of 5.8 and an enterprise value to capital employed ratio of 1. The stock is currently trading at a discount compared to its average historical valuations. However, while the stock has generated a return of 17.18% in the past year, its profits have only risen by 162.4%, resulting in a low PEG ratio of 0.1.

It is worth noting that the majority shareholders of Mawana Sugars are the promoters, which may have influenced the company's decision-making and performance. Overall, with the recent downgrade to 'Sell' by MarketsMOJO, investors may want to carefully consider their options before investing in Mawana Sugars.