Menon Bearings Ltd is Rated Sell by MarketsMOJO

Current Rating Overview

On 01 February 2026, Menon Bearings Ltd’s rating was revised to 'Sell' from 'Hold', accompanied by a decline in its Mojo Score from 51 to 41. This adjustment reflects a reassessment of the company’s overall investment appeal based on a comprehensive evaluation of its quality, valuation, financial trend, and technical factors. The 'Sell' rating indicates that, at present, the stock is considered unattractive for accumulation or holding, signalling caution for investors.

Quality Assessment

As of 13 February 2026, Menon Bearings Ltd holds an average quality grade. The company’s long-term growth has been modest, with net sales increasing at an annualised rate of 13.05% over the past five years. However, operating profit growth has been notably sluggish, averaging just 1.47% annually during the same period. This subdued profitability expansion suggests challenges in operational efficiency or competitive pressures within the auto components sector.

Furthermore, the company’s recent financial results have been largely flat. For instance, interest expenses for the nine months ended December 2025 stood at ₹3.69 crores, marking a significant 28.13% increase, which could weigh on net margins. Inventory turnover ratio for the half-year was relatively low at 8.46 times, indicating potential inefficiencies in inventory management. The debt-equity ratio, while moderate at 0.33 times, is the highest recorded in recent periods, signalling a cautious stance on leverage.

Valuation Considerations

Menon Bearings Ltd is currently classified as very expensive based on valuation metrics. The company’s return on capital employed (ROCE) is a respectable 17.6%, yet it trades at a premium with an enterprise value to capital employed ratio of 3.7. This elevated valuation multiple surpasses the average historical valuations of its peers in the auto components sector, suggesting that the market may be pricing in expectations of stronger future performance.

Despite this premium, the stock has delivered a 12.85% return over the past year as of 13 February 2026, while profits have risen by 29.8% during the same period. The price-to-earnings-growth (PEG) ratio stands at 0.7, which could imply some undervaluation relative to earnings growth. However, the high absolute valuation levels warrant caution, especially given the company’s flat financial trend and average quality.

Financial Trend Analysis

The financial trend for Menon Bearings Ltd is currently flat. The company’s operating results have shown limited momentum, with no significant improvement in profitability or growth metrics in recent quarters. The flat trend is underscored by the stable but unimpressive operating profit growth and the rising interest costs, which may constrain free cash flow generation.

Additionally, the company’s inventory and leverage metrics suggest operational and financial pressures that could impede future earnings expansion. The relatively low inventory turnover ratio may indicate slower sales or excess stock, while the increased debt level could raise financing costs and risk.

Technical Outlook

From a technical perspective, Menon Bearings Ltd is exhibiting a sideways trend. The stock’s price movement has lacked clear direction, with short-term gains offset by intermittent declines. Over the past six months, the stock has declined by 7.44%, while the one-month return is negative at -5.87%. However, the year-to-date return is positive at 11.75%, reflecting some recent recovery.

This sideways technical grade suggests limited momentum and a lack of strong buying interest, which aligns with the cautious stance reflected in the 'Sell' rating. Investors may find the stock’s price action less compelling compared to more dynamic peers in the auto components sector.

Additional Market Insights

Menon Bearings Ltd remains a microcap stock within the auto components and equipment sector. Notably, domestic mutual funds hold no stake in the company as of the current date, which may indicate a lack of institutional conviction or concerns about valuation and business prospects. Given that domestic mutual funds typically conduct thorough on-the-ground research, their absence could be a signal for investors to exercise prudence.

What This Rating Means for Investors

The 'Sell' rating on Menon Bearings Ltd suggests that investors should approach the stock with caution. While the company has demonstrated some profit growth and delivered positive returns over the past year, the combination of average quality, very expensive valuation, flat financial trends, and sideways technical movement tempers enthusiasm.

Investors considering Menon Bearings Ltd should weigh the risks associated with its current valuation premium and operational challenges against the modest growth prospects. The absence of institutional backing further underscores the need for careful analysis before committing capital.

In summary, the 'Sell' rating reflects a comprehensive assessment that the stock currently offers limited upside potential relative to its risks. Investors seeking exposure to the auto components sector may find more attractive opportunities elsewhere, particularly among companies with stronger fundamentals, more reasonable valuations, and clearer technical momentum.

Summary of Key Metrics as of 13 February 2026

• Mojo Score: 41 (Sell Grade)
• Market Capitalisation: Microcap
• Quality Grade: Average
• Valuation Grade: Very Expensive
• Financial Grade: Flat
• Technical Grade: Sideways
• 1-Year Stock Return: +12.85%
• 5-Year Net Sales Growth (CAGR): 13.05%
• 5-Year Operating Profit Growth (CAGR): 1.47%
• ROCE: 17.6%
• Enterprise Value to Capital Employed: 3.7
• PEG Ratio: 0.7
• Debt-Equity Ratio (HY): 0.33
• Inventory Turnover Ratio (HY): 8.46 times
• Interest Expense Growth (9M): 28.13%

These figures provide a snapshot of the company’s current financial health and market positioning, reinforcing the rationale behind the 'Sell' rating.

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