Permanent Magnets Ltd Upgraded to Sell Amid Mixed Technicals and Weak Financials

Quality Assessment: Underwhelming Financial Performance

Permanent Magnets Ltd, operating within the Other Electrical Equipment sector, continues to grapple with disappointing financial results. The company reported a sharp decline in profitability for Q2 FY25-26, with Profit Before Tax (PBT) falling by 69.63% to ₹2.32 crores and Profit After Tax (PAT) dropping 66.6% to ₹2.37 crores. These figures follow a flat performance in the previous quarter, signalling persistent operational challenges.

Return on Capital Employed (ROCE) remains subdued at 9.3%, with the half-year ROCE at a low 10.92%, reflecting inefficient capital utilisation. Over the past five years, operating profit has grown at a modest annual rate of just 3.09%, underscoring the company’s struggle to generate robust long-term growth. This weak financial trend has contributed to the company’s low Mojo Score of 32.0 and a Mojo Grade of Sell, an improvement from the prior Strong Sell rating but still indicative of caution.

Valuation: Expensive Despite Discount to Peers

Valuation metrics paint a mixed picture. Permanent Magnets Ltd trades at a relatively high Enterprise Value to Capital Employed (EV/CE) ratio of 4.5, suggesting the market prices in a premium for its capital base. However, when compared to its peers in the engineering and electrical equipment industry, the stock is trading at a discount to their average historical valuations. This discrepancy may reflect investor scepticism about the company’s growth prospects and profitability.

Despite the expensive valuation, the stock’s price performance has been lacklustre. Over the past year, the share price has declined by 11.57%, underperforming the BSE Sensex, which has delivered a positive 7.62% return over the same period. The company’s subdued profit trajectory, with a 6.8% fall in profits over the last year, further weighs on valuation sentiment.

Financial Trend: Negative Momentum Persists

Financial trends remain a concern for investors. The company’s recent quarterly results highlight a deteriorating earnings profile, with significant declines in both PBT and PAT. The flat results in June 2025 followed by negative outcomes in September 2025 indicate a lack of operational momentum. Additionally, the company’s long-term growth rate remains below industry standards, and its returns have consistently lagged behind broader market indices.

Institutional interest is notably absent, with domestic mutual funds holding no stake in Permanent Magnets Ltd. Given their capacity for detailed fundamental research, this lack of investment may signal a lack of confidence in the company’s near-term prospects or valuation.

Technical Analysis: Shift from Mildly Bearish to Sideways

The primary catalyst for the upgrade in rating is the improvement in technical indicators. The technical grade has shifted from mildly bearish to a sideways trend, signalling a stabilisation in price movement after a period of decline. Key technical metrics present a nuanced picture:

• MACD: Weekly readings remain bearish, but monthly MACD has turned mildly bullish, suggesting potential for upward momentum over a longer horizon.


• RSI: Both weekly and monthly Relative Strength Index (RSI) show no clear signal, indicating neither overbought nor oversold conditions.


• Bollinger Bands: Weekly data is mildly bearish, while monthly bands remain bearish, reflecting ongoing volatility and downward pressure.


• Moving Averages: Daily moving averages have turned mildly bullish, hinting at short-term price support.


• KST (Know Sure Thing): Weekly KST is bearish, but monthly KST has improved to mildly bullish, aligning with the MACD trend.


• Dow Theory: No definitive trend is observed on either weekly or monthly timeframes, reinforcing the sideways technical stance.

Price action remains range-bound, with the stock currently trading at ₹856.00, unchanged from the previous close. The 52-week high stands at ₹1,229.90, while the 52-week low is ₹600.00, indicating a wide trading range and significant volatility over the past year.

Long-Term Returns: Exceptional but Not Reflective of Recent Performance

Despite recent struggles, Permanent Magnets Ltd has delivered extraordinary long-term returns. Over the past 10 years, the stock has generated a staggering 5,041.14% return, vastly outperforming the Sensex’s 224.76% gain. Similarly, five-year returns stand at 512.30%, compared to the Sensex’s 77.88%. However, this stellar long-term performance contrasts sharply with the negative returns over the last one year (-11.57%) and year-to-date (-11.38%), highlighting a recent period of underperformance.

This divergence suggests that while the company has historically rewarded patient investors, current fundamentals and market conditions warrant caution.

Debt Profile and Risk Considerations

On the balance sheet front, Permanent Magnets Ltd maintains a conservative capital structure with an average Debt to Equity ratio of just 0.05 times. This low leverage reduces financial risk and interest burden, providing some cushion amid operational challenges. However, the company’s inability to translate this financial prudence into consistent profit growth remains a concern for investors.

Conclusion: A Cautious Upgrade Reflecting Technical Stabilisation

The upgrade of Permanent Magnets Ltd’s investment rating from Strong Sell to Sell reflects a nuanced reassessment driven by technical improvements rather than fundamental strength. While the company’s financial performance continues to disappoint, with declining profits, weak operating margins, and below-par growth, the stabilisation in technical indicators suggests that the stock may be finding a floor in the near term.

Investors should weigh the company’s exceptional long-term returns against its recent underperformance and financial headwinds. The current valuation, though expensive on some metrics, is discounted relative to peers, potentially offering a value proposition if operational improvements materialise. However, the absence of institutional backing and persistent earnings declines warrant a cautious approach.

Overall, Permanent Magnets Ltd remains a speculative proposition, with the recent rating upgrade signalling a tentative shift in market sentiment rather than a definitive turnaround.

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