Nahar Spinning Mills' Stock Upgraded to 'Hold' by MarketsMOJO After Positive Results

Nahar Spinning Mills, a smallcap textile company, has recently caught the attention of investors as its stock call has been upgraded to 'Hold' by MarketsMOJO on October 14, 2024. This upgrade comes after the company declared positive results in June 2024, breaking a streak of 7 consecutive negative quarters.
One of the key factors contributing to this upgrade is the company's operating profit to interest ratio, which is at its highest at 2.47 times. Additionally, the company's PAT (profit after tax) has grown by a significant 137.9% to Rs 6.64 crore, and its PBDIT (profit before depreciation, interest, and taxes) is also at its highest at Rs 51.21 crore.

From a technical standpoint, the stock is currently in a mildly bullish range, with its technical trend improving from sideways on October 14, 2024. The MACD and OBV technical factors also indicate a bullish trend.

Furthermore, the stock is currently trading at an attractive valuation with a 0.8 enterprise value to capital employed ratio and is at a discount compared to its average historical valuations. However, the company's long-term fundamental strength is weak, with a -24.92% CAGR growth in operating profits over the last 5 years. It also has a high debt to EBITDA ratio of 7.51 times, indicating a low ability to service debt. The company's return on equity (avg) is also low at 8.66%, signifying low profitability per unit of shareholders' funds.

It is worth noting that despite its smallcap size, domestic mutual funds hold only 1.77% of the company, which could indicate that they are not comfortable with the company's current price or business. Additionally, the stock has underperformed the market in the last 1 year, generating a return of only 6.96% compared to the market's (BSE 500) returns of 35.61%.

In conclusion, while Nahar Spinning Mills has shown positive results and technical indicators, its long-term fundamental strength and low interest from domestic mutual funds may be a cause for concern. Investors should carefully consider these factors before making any investment decisions.