Munjal Auto Industries Ltd Upgraded to Sell on Technical Improvements and Valuation Appeal

Technical Trends Show Signs of Stabilisation

The most significant catalyst behind the upgrade is the change in the technical grade from bearish to mildly bearish. While the weekly and monthly MACD indicators remain bearish and mildly bearish respectively, the Dow Theory weekly reading has turned mildly bullish, signalling a tentative shift in market sentiment. The Relative Strength Index (RSI) on both weekly and monthly charts currently shows no clear signal, indicating a neutral momentum phase.

Bollinger Bands continue to suggest mild bearishness on weekly and monthly timeframes, but the daily moving averages have improved to mildly bearish from previously stronger negative signals. The KST indicator remains bearish on both weekly and monthly charts, while On-Balance Volume (OBV) shows no discernible trend, reflecting subdued trading volumes.

This technical landscape suggests that while the stock is not yet in a confirmed uptrend, the downward momentum has eased considerably, providing a foundation for potential recovery. The stock price closed at ₹78.84 on 9 Feb 2026, up 5.58% from the previous close of ₹74.67, indicating positive short-term price action.

Valuation Remains Attractive Despite Profitability Concerns

Munjal Auto Industries currently trades at a discount relative to its peers, with an Enterprise Value to Capital Employed ratio of 1.5, which is considered attractive in the auto components sector. The company’s Return on Capital Employed (ROCE) stands at 7.1%, reflecting moderate capital efficiency but below the sector average.

Despite the negative financial performance in recent quarters, the valuation metrics suggest that the stock is priced for a turnaround. The 52-week price range of ₹60.04 to ₹114.60 places the current price near the lower end, offering potential upside if operational improvements materialise.

However, investors should note that the stock has underperformed the broader market over the past year, delivering a negative return of -12.56% compared to the BSE500’s 9.00% gain. Over longer horizons, the stock has generated a 3-year return of 71.39%, outperforming the Sensex’s 38.25% in the same period, though its 5-year and 10-year returns lag behind the benchmark.

Financial Trends Highlight Persistent Challenges

The financial trend remains a key concern, with the company reporting negative results for four consecutive quarters. The Profit After Tax (PAT) for the nine months ended December 2025 stood at ₹27.82 crores, reflecting a decline of 43.45% year-on-year. Profit Before Tax excluding other income (PBT less OI) for the quarter was ₹1.28 crore, down 77.5% compared to the previous four-quarter average.

Return on Capital Employed (ROCE) for the half-year was a low 9.72%, indicating subdued profitability relative to capital invested. Operating profit, however, has shown a strong long-term growth rate of 118.71% annually, suggesting underlying operational improvements despite recent setbacks.

Debt servicing capability remains robust, with a low Debt to EBITDA ratio of 1.48 times, signalling manageable leverage and financial stability. This strength provides some cushion against the ongoing earnings pressure.

Interestingly, domestic mutual funds hold a minimal stake of just 0.08%, which may reflect cautious sentiment among institutional investors who typically conduct thorough due diligence. This low institutional interest could be a factor weighing on the stock’s performance and liquidity.

Quality Assessment and Market Position

The company’s Mojo Score currently stands at 34.0, with a Mojo Grade of Sell, upgraded from Strong Sell on 9 Feb 2026. This score reflects a composite assessment of quality, valuation, financial trend, and technicals. The upgrade indicates a slight improvement in the overall outlook, primarily driven by technical stabilisation and valuation appeal, despite ongoing financial challenges.

Munjal Auto Industries operates in the Auto Components & Equipments sector, a highly competitive and cyclical industry. The company’s market capitalisation grade is 4, indicating a mid-sized entity with moderate market presence. The stock’s recent price action, including a 10.36% return over the past week versus the Sensex’s 2.94%, suggests short-term investor interest, possibly driven by technical factors rather than fundamental turnaround.

Outlook and Investor Considerations

While the upgrade to Sell from Strong Sell signals a modest improvement in Munjal Auto Industries’ outlook, investors should remain cautious given the company’s recent financial underperformance and subdued institutional interest. The technical indicators suggest a potential bottoming out, but confirmation of a sustained recovery will depend on improved earnings and operational execution.

The attractive valuation metrics and strong long-term operating profit growth rate provide some optimism for value-oriented investors willing to tolerate near-term volatility. However, the stock’s underperformance over the last year and weak profitability trends highlight the risks involved.

In summary, the upgrade reflects a balanced view that acknowledges technical stabilisation and valuation appeal while recognising ongoing financial challenges. Investors should closely monitor quarterly results and sector dynamics before increasing exposure.

Comparative Performance Summary

Over various timeframes, Munjal Auto Industries’ returns compared to the Sensex are as follows:

• 1 Week: +10.36% vs Sensex +2.94%
• 1 Month: +4.63% vs Sensex +0.59%
• Year-to-Date: -1.04% vs Sensex -1.36%
• 1 Year: -12.56% vs Sensex +7.97%
• 3 Years: +71.39% vs Sensex +38.25%
• 5 Years: +29.99% vs Sensex +63.78%
• 10 Years: +116.89% vs Sensex +249.97%

This data underscores the stock’s mixed performance, with strong medium-term gains but recent underperformance and lagging long-term returns relative to the benchmark.

Conclusion

The upgrade of Munjal Auto Industries Ltd’s investment rating to Sell from Strong Sell is primarily driven by improved technical indicators and an attractive valuation profile, despite persistent financial headwinds. The company’s ability to service debt and long-term operating profit growth are positive factors, but ongoing quarterly losses and weak profitability metrics temper enthusiasm.

Investors should weigh these factors carefully, considering the stock’s recent price recovery against its fundamental challenges. The current rating suggests cautious optimism but advises restraint until clearer signs of financial turnaround emerge.

Unlock special upgrade rates for a limited period. Start Saving Now →