Orient Beverages receives 'Hold' rating after positive Q1 results, caution advised for high debt

Orient Beverages, a microcap FMCG company, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company reported positive results in the quarter ending March 2024. With the highest net sales of Rs 39.46 crore, PAT of Rs 2.68 crore, and EPS of Rs 12.35, the company has shown promising growth.
Technically, the stock is in a bullish range and the trend has improved from mildly bullish on June 6, 2024. Multiple factors such as MACD, Bollinger Band, KST, and OBV are also indicating a bullish trend for the stock.

The majority shareholders of Orient Beverages are the promoters, which is a positive sign for investors. The company has consistently generated returns over the last 3 years and has outperformed BSE 500 in each of the last 3 annual periods.

However, Orient Beverages is a high debt company with weak long-term fundamental strength. Its operating profit has declined by an annual rate of -10.20% over the last 5 years, indicating poor long-term growth. The debt to equity ratio is also high at 2.53 times, and the return on equity is low at 6.77%, indicating low profitability per unit of shareholders' funds.

The stock is currently trading at a discount compared to its average historical valuations, making it an attractive option for investors. However, with a ROCE of 0.7, it is considered to be expensive with an enterprise value to capital employed ratio of 1.7. Additionally, while the stock has generated a return of 167.70% in the past year, its profits have declined by -97.9%.

Overall, Orient Beverages shows potential for growth, but investors should be cautious due to its high debt and weak long-term fundamentals. The 'Hold' rating from MarketsMOJO suggests that the stock may not see significant growth in the near future.