Munjal Auto Industries downgraded to 'Hold' by MarketsMOJO: Here's why.

Munjal Auto Industries, a smallcap company in the auto ancillary industry, has recently been downgraded to a 'Hold' by MarketsMOJO on October 16, 2024. This decision was based on various factors, including the company's ability to service its debt, positive financial results, and technical trends.
One of the main reasons for the 'Hold' rating is the company's strong ability to service its debt, with a low Debt to EBITDA ratio of 1.16 times. This indicates that the company is in a good financial position and can handle its debt obligations well.

In addition, Munjal Auto Industries has declared positive results for the last four consecutive quarters, with a ROCE (HY) of 14.86% and a PAT (9M) of Rs 57.18 Cr. The company also has a high DEBTORS TURNOVER RATIO (HY) of 6.80 times, which is a positive sign for its financial health.

From a technical standpoint, the stock is currently in a bullish range and has shown improvement since July 26, 2024, generating a return of 53.78%. Multiple factors, such as MACD, Bollinger Band, KST, DOW, and OBV, also indicate a bullish trend for the stock.

With a ROCE of 13.1, the stock is fairly valued with a 3.1 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations, making it an attractive option for investors.

However, it is worth noting that the company has shown poor long-term growth, with an annual operating profit growth rate of only 10.79% over the last five years. This could be a cause for concern for potential investors.

Another factor to consider is that despite its smallcap size, domestic mutual funds hold only 0.08% of the company. This could indicate that they are not comfortable with the current price or the business, as they have the capability to conduct in-depth research on companies.

In conclusion, while Munjal Auto Industries has shown market-beating performance in the near term, with a return of 150.48% in the last year, it may be wise to hold off on investing in the company for now, considering its poor long-term growth and low interest from domestic mutual funds.