Nila Infrastructures downgraded to 'Sell' by MarketsMOJO due to weak fundamentals

Nila Infrastructures, a microcap company in the construction and real estate industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 26, 2024. This decision was based on various factors that indicate a weak long-term fundamental strength for the company.
One of the main reasons for the downgrade is the company's poor performance in terms of operating profits, with a CAGR growth of -65.59% over the last 5 years. This indicates a lack of growth and profitability for the company. Additionally, Nila Infrastructures has a high debt to EBITDA ratio of 13.99 times, which raises concerns about its ability to service its debt.

From a technical standpoint, the stock is currently in a mildly bearish range and has shown a decline in trend since November 26, 2024, with a return of 3.29%. Factors such as MACD, Bollinger Band, and KST also suggest a bearish outlook for the stock.

However, it is worth noting that the company has declared outstanding results in September 2024, with a growth in net profit of 115.33%. It has also consistently reported positive results for the last 7 quarters and has a high operating profit to interest ratio of 5.77 times. Its operating cash flow for the last year is also at a high of Rs 65.38 crore.

In terms of valuation, Nila Infrastructures seems to be attractive with a ROCE of 10.1 and an enterprise value to capital employed ratio of 2.6. The stock is currently trading at a discount compared to its historical valuations, and its profits have risen by 605.6% in the past year, resulting in a PEG ratio of 0.

It is important to note that the majority shareholders of Nila Infrastructures are promoters, which may indicate a lack of interest from other investors. However, the stock has outperformed the market (BSE 500) with a return of 58.96% in the last year, compared to the market's return of 27.33%.

In conclusion, while Nila Infrastructures has shown some positive results in terms of net profit and operating cash flow, its overall weak fundamental strength and technical trend suggest a 'Sell' rating from MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.