NHPC Downgraded to 'Sell' by MarketsMOJO: Factors to Consider Before Investing

NHPC, a largecap company in the power generation and distribution industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 22, 2024. This decision was based on several factors, including the company's low ability to service debt with a high Debt to EBITDA ratio of 3.91 times. Additionally, NHPC has shown poor long-term growth with a meager annual growth rate of 0.63% in net sales over the last 5 years.
Furthermore, the company's return on equity (avg) of 9.89% indicates low profitability per unit of shareholders' funds. This is further supported by the fact that NHPC's results in June 2024 were flat, with the lowest ROCE (HY) at 7.09% and the highest DEBT-EQUITY RATIO (HY) at 0.84 times.

From a technical standpoint, the stock is currently in a Mildly Bearish range, with the technical trend deteriorating from Mildly Bullish on October 22, 2024, resulting in a -4.13% return since then. Multiple factors, such as MACD, Bollinger Band, and KST, also suggest a bearish outlook for the stock.

Moreover, NHPC's valuation is considered Very Expensive with a ROCE of 5.4 and an enterprise value to capital employed ratio of 1.6. However, the stock is currently trading at a discount compared to its average historical valuations. Despite generating a return of 52.63% in the past year, the company's profits have fallen by -7%.

On the other hand, NHPC has high institutional holdings at 20.29%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors. Additionally, NHPC has consistently outperformed BSE 500 in the last 3 annual periods, further highlighting its potential for growth.

In conclusion, while NHPC may have shown some positive returns in the past year, its overall financial performance and technical indicators suggest a bearish outlook. Investors should carefully consider these factors before making any investment decisions.