NLC India Downgraded to 'Sell' by MarketsMOJO: High Debt and Low Profitability Raise Concerns

NLC India, a largecap company in the power generation and distribution industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 8, 2024. This decision was based on several factors, including the company's high debt to EBITDA ratio of 6.55 times, indicating a low ability to service debt. Additionally, the company's return on equity (avg) of 9.97% suggests a low profitability per unit of shareholders' funds.
The company's financial results for September 2024 have also been flat, with a decline of -31.80% in PAT (9M) and a ROCE (HY) of 8.18%, the lowest in recent years. Furthermore, the PBT LESS OI (Q) has fallen by -15.5% compared to the previous quarter.

However, there are some positive factors to consider. NLC India has shown healthy long-term growth, with an annual rate of 29.78% in operating profit. The technical trend for the stock is currently sideways, indicating no clear price momentum. The stock is also trading at a discount compared to its average historical valuations.

Institutional holdings in NLC India are high at 21.14%, indicating that these investors have better resources and capabilities to analyze the company's fundamentals. Their stake has also increased by 0.83% in the previous quarter.

Despite the recent downgrade, NLC India has consistently generated returns over the last 3 years, outperforming the BSE 500 index in each of the last 3 annual periods. However, it is important to note that while the stock has generated a return of 66.61% in the last year, its profits have fallen by -4.5%.

In conclusion, while NLC India may have some positive aspects, the recent downgrade by MarketsMOJO suggests caution for potential investors. The company's high debt and low profitability should be carefully considered before making any investment decisions.