Real Touch Finance Ltd. Upgraded to Sell on Technical Improvements and Valuation Appeal

Quality Assessment: Mixed Signals Amidst Positive Earnings Growth

Real Touch Finance’s quality metrics present a complex picture. The company has demonstrated consistent positive financial performance, reporting positive results for 12 consecutive quarters. Its latest six-month Profit After Tax (PAT) stands at ₹3.36 crores, marking a robust growth of 52.04%. Net sales for the same period have increased by 27.27% to ₹16.85 crores, while the quarterly Earnings Per Share (EPS) reached a high of ₹1.59.

However, the long-term fundamental strength remains weak, with an average Return on Equity (ROE) of just 6.20%. This figure is modest compared to industry standards and raises questions about the company’s ability to generate sustainable shareholder value over time. Despite recent improvements, the ROE indicates that Real Touch Finance is yet to fully capitalise on its earnings growth to enhance overall quality.

Valuation: Attractive Yet Cautious

Valuation metrics have improved, contributing to the upgrade in rating. The company currently trades at a Price to Book Value (P/B) of 1.3, which is considered fair and attractive relative to its peers’ historical averages. Additionally, the ROE for the latest period has risen to 12.2%, signalling better utilisation of equity capital in recent quarters.

Despite the stock’s significant underperformance over the past year, with a return of -42.49% compared to the BSE500’s positive 7.53%, the company’s profits have grown by 60% during the same timeframe. This disparity is reflected in a low PEG ratio of 0.2, suggesting that the stock may be undervalued relative to its earnings growth potential. Investors should note, however, that the 52-week high of ₹85.00 contrasts sharply with the current price of ₹48.31, indicating considerable price volatility and risk.

Financial Trend: Positive Momentum Despite Market Underperformance

Real Touch Finance’s financial trend shows encouraging signs. The company has delivered positive quarterly results consistently, with PAT and net sales growth rates exceeding 50% and 27% respectively over the last six months. This steady improvement in earnings quality and top-line expansion underpins the recent upgrade in rating.

However, the stock’s price performance has lagged significantly behind the broader market. Over the last one year, Real Touch Finance’s stock has declined by 42.49%, while the Sensex and BSE500 indices have posted gains of 8.65% and 7.53% respectively. This underperformance suggests that market sentiment remains cautious, possibly due to concerns about the company’s long-term fundamentals and sectoral headwinds.

Longer-term returns tell a more favourable story. Over five and ten years, the stock has delivered returns of 415.03% and 289.60% respectively, substantially outperforming the Sensex’s 68.52% and 240.06% returns over the same periods. This indicates that while short-term volatility persists, the company has historically rewarded patient investors.

Technical Analysis: Shift from Bearish to Mildly Bearish Signals

The upgrade in Real Touch Finance’s rating is largely driven by changes in technical indicators. The technical grade has improved from bearish to mildly bearish, reflecting a subtle shift in market dynamics. Weekly Moving Average Convergence Divergence (MACD) readings have turned mildly bullish, although monthly MACD remains mildly bearish. This mixed signal suggests some short-term buying interest but persistent caution over the medium term.

Relative Strength Index (RSI) readings on both weekly and monthly charts show no clear signal, indicating a neutral momentum stance. Bollinger Bands on the weekly chart are sideways, while monthly bands remain bearish, highlighting a consolidation phase with potential downside risk.

Other technical indicators such as the Know Sure Thing (KST) oscillator remain bearish on the weekly chart and mildly bearish monthly, while Dow Theory analysis shows no clear weekly trend but a mildly bullish monthly trend. On-Balance Volume (OBV) also indicates no trend weekly and mildly bearish monthly, suggesting volume patterns have yet to confirm a strong directional move.

Daily moving averages remain bearish, underscoring the need for caution in the near term. The stock’s current price of ₹48.31 is closer to its 52-week low of ₹29.84 than its high of ₹85.00, reflecting ongoing price pressure despite technical improvements.

Market Capitalisation and Shareholding

Real Touch Finance holds a market cap grade of 4, indicating a micro-cap or small-cap status within the NBFC sector. The majority shareholding rests with promoters, which can be a double-edged sword; while promoter control often ensures strategic continuity, it may also limit liquidity and increase governance risks.

Summary and Outlook

The upgrade of Real Touch Finance Ltd. from Strong Sell to Sell reflects a cautious optimism driven by improved technical indicators and attractive valuation metrics. The company’s consistent positive earnings growth and fair Price to Book valuation underpin this more favourable stance. However, the weak long-term fundamental strength, as evidenced by a modest average ROE of 6.20%, and significant underperformance relative to the broader market over the past year, temper enthusiasm.

Investors should weigh the company’s strong recent financial trends and historical outperformance over longer horizons against ongoing technical caution and sectoral risks. The mildly bearish technical signals suggest that while the stock may be stabilising, it has yet to demonstrate a clear upward momentum. As such, the Sell rating reflects a balanced view that acknowledges improvement but advises prudence.

Key Financial and Market Metrics at a Glance:

• Current Price: ₹48.31


• 52-Week High / Low: ₹85.00 / ₹29.84


• Latest Six-Month PAT: ₹3.36 crores (52.04% growth)


• Latest Six-Month Net Sales: ₹16.85 crores (27.27% growth)


• Quarterly EPS: ₹1.59 (highest)


• Average ROE: 6.20%; Latest ROE: 12.2%


• Price to Book Value: 1.3


• PEG Ratio: 0.2


• One-Year Stock Return: -42.49% vs Sensex +8.65%


• Five-Year Stock Return: +415.03% vs Sensex +68.52%


• Mojo Score: 34.0 (Sell, upgraded from Strong Sell)

Overall, Real Touch Finance Ltd. remains a stock for investors who favour value and are willing to tolerate volatility and fundamental risks. The recent rating upgrade signals that the company is on a path of recovery, but it is not yet out of the woods.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →