Oriental Aromatics Downgraded to 'Hold' by MarketsMOJO: Strong Debt Servicing, Positive Results, and Technical Indicators

Oriental Aromatics, a smallcap company in the chemicals industry, has recently been downgraded to a 'Hold' by MarketsMOJO on September 26, 2024. This decision was based on various factors, including the company's ability to service its debt, its recent financial results, and its stock's technical indicators.
One of the main reasons for the downgrade is the company's strong ability to service its debt, with a low Debt to EBITDA ratio of 1.48 times. This indicates that the company is in a good financial position and is able to manage its debt effectively.

In terms of financial performance, Oriental Aromatics declared very positive results in June 2024, with a growth in Operating Profit of 1497.32%. The company has also shown positive results for the last two consecutive quarters, with its highest Operating Cash Flow at Rs 141.80 Cr and highest PBDIT at Rs 22.11 cr. Additionally, its Operating Profit to Net Sales ratio is at its highest at 10.25%.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple indicators such as MACD, Bollinger Band, and KST showing bullish signals.

However, the company's long-term growth has been poor, with an annual growth rate of -31.54% in Operating Profit over the last 5 years. This may be a cause for concern for investors.

Furthermore, with a ROCE of 3.3, the stock is currently trading at an expensive valuation with an Enterprise value to Capital Employed ratio of 2.2. However, it is worth noting that the stock is currently trading at a discount compared to its average historical valuations.

In the past year, the stock has generated a return of 38.53%, while its profits have risen by 394.9%. This gives the company a PEG ratio of 0.2, indicating that it may be undervalued.

It is also interesting to note that despite its smallcap size, domestic mutual funds hold only 0% of the company. This could mean that they are not comfortable with the current price or they have not conducted in-depth research on the company.

In conclusion, while Oriental Aromatics has shown positive financial results and has a strong ability to service its debt, its long-term growth and expensive valuation may be a cause for concern. Investors should carefully consider these factors before making any investment decisions.