National Fittings Ltd Upgraded to Hold as Technical and Financial Metrics Improve

Technical Trends Shift to Mildly Bearish

The primary catalyst for the rating upgrade stems from a notable improvement in the company’s technical profile. Previously classified as bearish, the technical trend has softened to mildly bearish on a monthly basis, indicating a potential stabilisation in price momentum. Key technical indicators present a mixed but improving picture: the Moving Average Convergence Divergence (MACD) remains bearish on a weekly scale but has shifted to mildly bearish monthly, while the Relative Strength Index (RSI) shows no significant signal on both weekly and monthly charts.

Bollinger Bands reveal a bullish stance on the monthly timeframe, contrasting with a mildly bearish weekly outlook. Meanwhile, the Know Sure Thing (KST) oscillator is bearish weekly but bullish monthly, suggesting that longer-term momentum may be turning positive despite short-term caution. Daily moving averages remain bearish, reflecting some near-term selling pressure. Overall, these technical nuances justify the upgrade to Hold, signalling that while the stock is not yet in a strong uptrend, the downtrend is losing steam.

Financial Performance Demonstrates Strong Growth

National Fittings has delivered a series of encouraging financial results, underpinning the revised rating. The company reported positive quarterly performance for Q2 FY25-26, with Profit Before Tax excluding other income (PBT less OI) surging by 357.14% to ₹1.60 crore. Operating profit has grown at an impressive annual rate of 48.91%, reflecting operational efficiency and demand resilience in the castings and forgings segment.

Return on Capital Employed (ROCE) for the half-year period reached a healthy 14.43%, while Return on Equity (ROE) stands at a respectable 10.7%. The company’s Profit After Tax (PAT) for the first nine months rose to ₹8.00 crore, marking a significant improvement. These metrics highlight a robust financial trend, with consistent profitability gains over the last three consecutive quarters, reinforcing confidence in the company’s earnings quality and growth trajectory.

Quality Metrics and Capital Structure Support Stability

National Fittings maintains a strong quality profile, evidenced by its low average Debt to Equity ratio of 0.10 times, which indicates prudent leverage and financial discipline. This conservative capital structure reduces risk and enhances the company’s ability to weather sector cyclicality. The company’s operational consistency and positive earnings momentum over multiple quarters further attest to its quality credentials.

Moreover, the company’s market capitalisation grade stands at 4, reflecting a mid-sized presence within its industry. The Mojo Score of 51.0 and a Mojo Grade upgrade from Sell to Hold reflect a balanced assessment of risk and opportunity, signalling that while the stock is not yet a strong buy, it is no longer a sell candidate.

Valuation Remains Attractive Amidst Sector Peers

Valuation metrics for National Fittings remain compelling. The stock trades at a Price to Book (P/B) ratio of 1.6, which is considered fair and attractive relative to its peers in the Iron & Steel Products sector. The company’s Price/Earnings to Growth (PEG) ratio is an exceptionally low 0.1, indicating that earnings growth significantly outpaces the stock price appreciation, a positive signal for value-conscious investors.

Over the past year, the stock has generated a total return of 12.38%, outperforming the Sensex return of 5.37% during the same period. This outperformance is supported by a remarkable 107.3% increase in profits, underscoring the company’s ability to convert operational improvements into shareholder value. Despite a 52-week high of ₹235.00 and a low of ₹109.95, the current price of ₹152.00 suggests room for upside as the company consolidates gains and improves fundamentals.

Stock Performance Compared to Sensex and Long-Term Returns

While short-term returns have been mixed, with a 1-month decline of 9.58% compared to Sensex’s 4.78% fall, the long-term performance remains impressive. Over three years, National Fittings has delivered a staggering 147.96% return, vastly outperforming the Sensex’s 36.26%. Over five years, the stock’s return of 297.91% dwarfs the benchmark’s 64.00%, highlighting its strong growth potential and resilience.

However, over the last 10 years, the stock’s 97.40% return trails the Sensex’s 232.80%, reflecting earlier periods of underperformance. This historical context suggests that the recent upgrades and improved financials could mark a turning point for the company’s market trajectory.

Outlook and Investment Considerations

The upgrade to Hold reflects a nuanced view of National Fittings Ltd’s prospects. The company’s improved technical indicators suggest that the stock may be stabilising after a period of bearishness, while its strong financial performance and attractive valuation provide a solid foundation for future gains. Investors should note the company’s low leverage and consistent profitability as key strengths that mitigate downside risks.

Nonetheless, some caution remains warranted given the mixed technical signals and the stock’s recent underperformance relative to the broader market in the short term. The daily moving averages and weekly MACD remain bearish, indicating that momentum has not fully reversed. Investors may consider holding existing positions while monitoring for confirmation of a sustained uptrend before increasing exposure.

In summary, National Fittings Ltd’s rating upgrade to Hold is justified by a combination of improved technical trends, robust financial growth, prudent capital management, and reasonable valuation. This balanced assessment positions the stock as a viable option for investors seeking exposure to the Iron & Steel Products sector with moderate risk tolerance.

Summary of Key Metrics:

• Mojo Score: 51.0 (Upgraded from Sell to Hold)
• Market Cap Grade: 4
• Debt to Equity Ratio: 0.10 times (Low leverage)
• Operating Profit Growth: 48.91% CAGR
• PBT less OI (Q2 FY25-26): ₹1.60 crore (357.14% growth)
• ROCE (Half Year): 14.43%
• PAT (9 months): ₹8.00 crore
• ROE: 10.7%
• Price to Book Value: 1.6
• PEG Ratio: 0.1
• 1-Year Stock Return: 12.38% vs Sensex 5.37%

Technical Indicators Overview:

• MACD: Weekly Bearish, Monthly Mildly Bearish
• RSI: No Signal (Weekly & Monthly)
• Bollinger Bands: Weekly Mildly Bearish, Monthly Bullish
• Moving Averages: Daily Bearish
• KST: Weekly Bearish, Monthly Bullish
• Dow Theory: No Trend (Weekly & Monthly)

Price Range & Recent Movement:

Current Price: ₹152.00 | Previous Close: ₹150.00 | 52-Week High: ₹235.00 | 52-Week Low: ₹109.95 | Today’s High: ₹157.50 | Today’s Low: ₹150.00

Comparative Returns:

• 1 Week: -0.75% (Stock) vs 0.16% (Sensex)
• 1 Month: -9.58% vs -4.78%
• Year to Date: -10.06% vs -4.17%
• 1 Year: 12.38% vs 5.37%
• 3 Years: 147.96% vs 36.26%
• 5 Years: 297.91% vs 64.00%
• 10 Years: 97.40% vs 232.80%

Conclusion

National Fittings Ltd’s upgrade to Hold reflects a strategic reassessment based on improved technical signals, strong financial results, and attractive valuation metrics. While the stock is not yet a definitive buy, the company’s fundamentals and market positioning suggest it is well placed to benefit from sectoral recovery and operational momentum. Investors should monitor technical developments closely and consider the stock as a stable holding within a diversified portfolio.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →