Privi Speciality Chemicals Downgraded to 'Sell' by MarketsMOJO: Weak Fundamentals and High Debt Raise Concerns

Privi Speciality Chemicals, a smallcap company in the chemicals industry, has recently been downgraded to a 'Sell' by MarketsMOJO on May 9, 2024. This decision was based on several factors, including weak long-term fundamental strength, poor growth in net sales and operating profit, and a high debt to EBITDA ratio.
The company's average Return on Capital Employed (ROCE) stands at 9.94%, indicating a weak long-term fundamental strength. Additionally, the net sales have only grown at an annual rate of 5.49% and operating profit at 3.98% over the last 5 years, showing poor long-term growth. Furthermore, the company's high debt to EBITDA ratio of 3.47 times suggests a low ability to service debt.

From a technical standpoint, the stock is currently in a Mildly Bearish range and has generated -2.26% returns since May 9, 2024. The MACD and KST technical factors are also Bearish, indicating a negative trend.

In the last 1 year, Privi Speciality Chemicals has underperformed the market, generating a return of only 3.25% compared to the market's (BSE 500) returns of 31.00%. However, the company did declare positive results for the last 3 consecutive quarters, with a growth in net sales of 19.95%. The company's ROCE (HY) is also at its highest at 11.79%, along with PBDIT (Q) at Rs 91.00 crore and PBT LESS OI (Q) at Rs 36.38 crore.

With a ROCE of 10.8, the company has a fair valuation with a 2.9 Enterprise value to Capital Employed. The stock is currently trading at a discount compared to its average historical valuations. Additionally, while the stock has only generated a return of 3.25% in the last year, its profits have risen by 327.1%, resulting in a low PEG ratio of 0.2.

It is worth noting that the majority shareholders of Privi Speciality Chemicals are the promoters themselves. Overall, while the company has shown some positive results in the recent past, the current downgrading to a 'Sell' by MarketsMOJO suggests caution for potential investors.