Raunaq International Ltd Downgraded to Strong Sell Amid Technical and Financial Concerns

Technical Analysis: A Shift Towards Bearish Sentiment

The primary driver behind the downgrade is the change in Raunaq International’s technical grade, which moved from mildly bearish to outright bearish. Key technical indicators reveal a predominantly negative outlook. The Moving Average Convergence Divergence (MACD) stands bearish on a weekly basis and mildly bearish monthly, signalling weakening momentum. Similarly, Bollinger Bands indicate a mildly bearish trend weekly and bearish monthly, suggesting increased volatility with downward pressure.

Other technical tools reinforce this view: the daily moving averages are bearish, the Know Sure Thing (KST) oscillator is bearish weekly and mildly bearish monthly, and Dow Theory assessments remain mildly bearish across weekly and monthly timeframes. The On-Balance Volume (OBV) indicator shows no clear trend weekly but mildly bearish monthly, indicating subdued buying interest. Relative Strength Index (RSI) readings provide no significant signals, reflecting a lack of strong directional momentum.

These technical signals collectively justify the downgrade in the technical grade and contribute heavily to the overall Strong Sell rating. The stock’s price closed at ₹51.50 on 20 Feb 2026, up 4.99% on the day, but remains closer to its 52-week low of ₹46.35 than its high of ₹98.80, underscoring persistent downward pressure.

Valuation: From Very Attractive to Attractive

Raunaq International’s valuation grade was revised from very attractive to attractive, reflecting a subtle shift in market perception. The company trades at a price-to-earnings (PE) ratio of 9.73, which remains low relative to many peers, signalling reasonable price levels. The price-to-book value stands at 1.82, indicating the stock is priced modestly above its net asset value.

Enterprise value (EV) metrics present a mixed picture. The EV to EBIT ratio is negative at -18.20, reflecting operating losses, while EV to EBITDA is 18.20, suggesting some premium on earnings before depreciation and amortisation. EV to capital employed is a modest 1.74, reinforcing the attractive valuation stance. The company’s return on capital employed (ROCE) is 8.15%, and return on equity (ROE) is a healthy 18.73%, indicating efficient use of capital despite operational challenges.

Compared to industry peers such as Antony Waste Handling (attractive valuation) and Jindal Photo (very expensive), Raunaq International remains competitively priced. However, the downgrade in valuation grade signals caution as the company’s operating losses and weak long-term fundamentals temper enthusiasm.

Financial Trend: Mixed Signals Amid Operating Losses

Financially, Raunaq International has delivered positive quarterly results for four consecutive quarters, with net sales for the latest six months rising sharply by 128.46% to ₹18.30 crores. Profit after tax (PAT) for the nine months ended is ₹1.22 crores, reflecting a 217% increase in profits over the past year. The half-year ROCE peaked at 23.52%, highlighting improved capital efficiency in the short term.

Despite these encouraging signs, the company’s long-term fundamentals remain weak. Operating profit has grown at an annualised rate of just 14.87% over the last five years, and the company continues to report operating losses. Its ability to service debt is poor, with an average EBIT to interest coverage ratio of -3.06, indicating financial strain. These factors contribute to the company’s weak long-term fundamental strength and justify the Strong Sell rating.

Market returns further illustrate the company’s challenges. Over the past year, Raunaq International’s stock has declined by 4.66%, underperforming the BSE500 index’s 12.01% gain. Over longer horizons, the stock has delivered strong returns, with 3-year and 5-year gains of 108.08% and 137.88% respectively, but a 10-year return of -52.80% contrasts sharply with the Sensex’s 247.96% growth, underscoring inconsistent performance.

Technical Grade Change: The Key Catalyst

The downgrade to Strong Sell is primarily attributed to the technical grade change. The shift from mildly bearish to bearish technicals reflects deteriorating momentum and increased downside risk. This is evident in the weekly and monthly MACD, Bollinger Bands, moving averages, and KST indicators, all signalling bearish trends. The Dow Theory also remains mildly bearish, reinforcing the negative technical outlook.

While the stock price showed a 4.99% gain on 20 Feb 2026, this appears to be a short-term bounce within a broader downtrend. The technical deterioration suggests investors should exercise caution, as the stock may face further declines in the near term.

Quality Assessment: Weak Long-Term Fundamentals Despite Recent Gains

Raunaq International’s quality grade remains poor, reflecting weak long-term fundamentals. The company’s operating losses and low EBIT to interest coverage ratio highlight financial vulnerability. Although recent quarters have shown positive sales growth and profit improvement, the underlying business model struggles to generate consistent operating profits.

The company’s promoter group holds majority ownership, which can provide stability but also concentrates risk. The mixed financial signals and weak debt servicing capacity weigh heavily on the quality assessment, reinforcing the Strong Sell recommendation.

Investor Takeaway: Cautious Approach Recommended

Raunaq International Ltd’s downgrade to Strong Sell is driven by a combination of deteriorating technical indicators, a cautious valuation stance, and weak long-term financial fundamentals despite some recent positive trends. The stock’s underperformance relative to the broader market over the past year and its bearish technical profile suggest limited upside in the near term.

Investors should weigh the company’s attractive valuation against its operational challenges and technical weakness. While the construction sector offers growth opportunities, Raunaq International’s current profile indicates elevated risk. Those seeking exposure in this space may consider alternative stocks with stronger fundamentals and more favourable technicals.

Summary of Ratings and Scores

As of 19 Feb 2026, Raunaq International Ltd holds a Mojo Score of 29.0 with a Mojo Grade of Strong Sell, downgraded from Sell. The market capitalisation grade stands at 4. The technical grade shifted from mildly bearish to bearish, while valuation moved from very attractive to attractive. Financial trends show positive quarterly sales and profit growth but weak long-term fundamentals. Quality remains weak due to operating losses and poor debt servicing ability.

Overall, the downgrade reflects a comprehensive reassessment of the company’s risk-return profile, urging investors to exercise caution and consider more robust alternatives within the construction sector and beyond.

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