Optiemus Infracom Ltd Downgraded to Strong Sell Amid Deteriorating Financial and Technical Metrics

Financial Performance Deteriorates Sharply

The primary catalyst for the downgrade lies in Optiemus Infracom’s recent financial results for the quarter ended December 2025. The company’s financial trend shifted from flat to negative, with the financial score plunging from +5 to -6 over the past three months. Notably, the quarterly Profit After Tax (PAT) declined by 28.9% to ₹12.23 crores compared to the previous four-quarter average, underscoring a significant earnings contraction.

Return on Capital Employed (ROCE) also hit a low of 11.53% for the half-year period, reflecting diminished efficiency in generating profits from capital invested. This is particularly concerning given the company’s average ROCE over recent years stands at a modest 5.92%, indicating persistently weak management efficiency. Furthermore, interest expenses surged by 30.08% to ₹6.27 crores in the quarter, exacerbating pressure on profitability and cash flows.

Other financial ratios paint a mixed picture. On the positive side, the Debtors Turnover Ratio remains robust at 8.15 times, signalling effective receivables management. However, the Earnings Per Share (EPS) dropped to a quarterly low of ₹1.38, and Profit Before Tax excluding Other Income (PBT less OI) fell by 5.4%, reinforcing the narrative of weakening core operations.

Valuation and Market Performance Lag Behind Peers

Despite some long-term growth in net sales at an annualised rate of 62.36% and operating profit growth of 33.38%, Optiemus Infracom’s valuation metrics remain subdued. The company’s Enterprise Value to Capital Employed ratio stands at a fair 4.5, but this is accompanied by a market capitalisation grade of just 3, reflecting its relatively small size and limited market liquidity.

Stock price performance has been disappointing over recent periods. The share price closed at ₹417.30 on 17 February 2026, marginally up 0.76% from the previous close of ₹414.15, but still significantly below its 52-week high of ₹712.95. Returns over the last year have been negative at -22.56%, underperforming the Sensex’s positive 9.66% return over the same period. Year-to-date losses stand at -17.42%, further highlighting the stock’s relative weakness.

Longer-term returns tell a more nuanced story, with the stock delivering a 10-year return of 628.91%, substantially outperforming the Sensex’s 259.08%. However, recent underperformance and deteriorating fundamentals have overshadowed this historical strength, prompting a reassessment of the stock’s investment appeal.

Technical Indicators Signal Bearish Momentum

The downgrade also reflects a shift in technical trends from mildly bearish to outright bearish. Key momentum indicators such as the Moving Average Convergence Divergence (MACD) are bearish on the weekly timeframe and mildly bearish monthly. The Relative Strength Index (RSI) shows a weekly bullish signal but no clear monthly trend, indicating short-term oversold conditions amid longer-term weakness.

Bollinger Bands and the Know Sure Thing (KST) oscillator both signal bearish momentum on weekly charts, with mild bearishness on monthly charts. Daily moving averages confirm a bearish stance, while Dow Theory readings are mildly bullish weekly but show no clear monthly trend. On-Balance Volume (OBV) indicators remain neutral, suggesting volume has not decisively confirmed price moves.

Overall, these technical signals suggest that the stock is under selling pressure, with limited near-term upside until a clear reversal pattern emerges.

Quality Assessment Highlights Management and Debt Concerns

Optiemus Infracom’s quality grade has also been impacted by concerns over management efficiency and debt servicing capability. The company’s average EBIT to interest ratio is a negative -1.50, indicating that earnings before interest and tax are insufficient to cover interest expenses, a red flag for credit risk and financial stability.

Low ROCE of 5.92% further emphasises the company’s struggle to generate adequate returns on invested capital, which is a critical measure of operational effectiveness. This weak profitability per unit of capital raises questions about the sustainability of growth and the ability to fund expansion without excessive leverage.

Despite these challenges, the company’s debtor turnover ratio remains a bright spot, suggesting efficient collection processes and working capital management. However, this alone is insufficient to offset the broader financial weaknesses.

Investor Implications and Outlook

The downgrade to Strong Sell by MarketsMOJO reflects a comprehensive reassessment of Optiemus Infracom’s investment merits across multiple dimensions. The combination of deteriorating financial results, unfavourable valuation relative to peers, and bearish technical signals suggests heightened downside risk in the near to medium term.

Investors should be cautious given the company’s negative quarterly earnings growth, rising interest burden, and poor debt servicing metrics. While the stock has demonstrated strong long-term returns historically, recent underperformance and fundamental weaknesses warrant a conservative stance.

Market participants may consider monitoring the company’s upcoming quarterly results and any strategic initiatives aimed at improving profitability and capital efficiency. Until then, the Strong Sell rating advises a defensive approach, favouring alternative opportunities within the telecom equipment sector or broader market.

Summary of Key Metrics and Ratings

As of 16 February 2026, Optiemus Infracom Ltd’s MarketsMOJO score stands at 26.0, with a Strong Sell grade, downgraded from Sell. The company’s market cap grade is 3, reflecting its mid-tier size. Financial trend has shifted to negative, technical trend to bearish, and quality metrics remain weak. The stock price closed at ₹417.30, near its 52-week low of ₹366.05, and significantly below the 52-week high of ₹712.95.

Returns over the last year are -22.56%, underperforming the Sensex by over 30 percentage points. Key financial indicators such as PAT, ROCE, and interest expenses have deteriorated, while technical indicators confirm bearish momentum. These factors collectively underpin the Strong Sell recommendation.

Investors seeking exposure to the telecom equipment sector should weigh these risks carefully and consider peer comparisons to identify more resilient or better-valued alternatives.

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