Reliable Data Services Ltd Upgraded to Buy on Strong Financial and Technical Momentum

Technical Trends Signal Bullish Momentum

The primary catalyst for the rating upgrade stems from a marked improvement in the company’s technical profile. The technical grade shifted from mildly bullish to bullish, supported by a confluence of positive signals. Daily moving averages have turned bullish, indicating sustained upward momentum in the stock price. The On-Balance Volume (OBV) indicator shows bullish trends on both weekly and monthly charts, suggesting strong buying interest.

While some indicators such as the MACD and KST remain mildly bearish on a weekly basis, the overall technical outlook is positive. Bollinger Bands on the weekly chart are bullish, and the Dow Theory assessment has moved to mildly bullish territory. The stock price has surged 4.93% on the day to ₹164.90, nearing its 52-week high of ₹167.75, underscoring the technical strength.

Valuation Remains Attractive Amid Robust Returns

Reliable Data Services Ltd’s valuation metrics further justify the upgrade. The company boasts a return on capital employed (ROCE) of 15.4%, which is considered very attractive within the NBFC sector. Its enterprise value to capital employed ratio stands at a modest 2.1, indicating the stock is trading at a discount relative to its peers’ historical valuations.

Over the past year, the stock has delivered an impressive return of 127.64%, vastly outperforming the BSE500 index’s 7.74% gain. This market-beating performance is complemented by a PEG ratio of 0.1, signalling that the stock’s price growth is undervalued relative to its earnings growth. Such valuation metrics provide a compelling case for investors seeking growth at a reasonable price.

Financial Trends Reflect Strong Growth and Profitability

Financially, Reliable Data Services Ltd has demonstrated robust growth in recent quarters, reinforcing the upgrade decision. Net sales have expanded at an annualised rate of 45.06%, signalling healthy top-line momentum. Profit after tax (PAT) for the latest six months reached ₹3.92 crores, growing at an impressive 53.13% year-on-year.

Profit before tax excluding other income (PBT less OI) for the quarter stood at ₹3.03 crores, surging 74.14%. The company’s debtor turnover ratio for the half-year is at a high of 2.10 times, indicating efficient receivables management and strong operational performance. These financial metrics highlight the company’s ability to convert sales into profits effectively while maintaining sound asset utilisation.

Quality Assessment and Shareholding Structure

Reliable Data Services Ltd maintains a strong quality profile, supported by its consistent financial performance and operational efficiency. The company’s Mojo Score stands at 74.0, with a Mojo Grade upgraded to Buy from Hold, reflecting enhanced confidence in its fundamentals. The market capitalisation grade is 4, indicating a mid-cap status with considerable growth potential.

Promoters remain the majority shareholders, providing stability and aligned interests with minority investors. The company operates within the IT - Software industry segment, which complements its NBFC sector classification by leveraging technology-driven financial services.

Stock Performance Outpaces Market Benchmarks

Reliable Data Services Ltd’s stock has outperformed key market indices over multiple time horizons. The one-year return of 127.64% dwarfs the Sensex’s 9.10% gain and the BSE500’s 7.74% rise. Even on shorter time frames, the stock has delivered strong returns: 14.91% over one week and 7.46% over one month, compared to Sensex returns of 0.46% and -0.76% respectively.

Year-to-date, the stock has appreciated 13.18%, while the Sensex has declined marginally by 0.18%. This consistent outperformance underscores the stock’s resilience and appeal amid varying market conditions.

Outlook and Investor Considerations

The upgrade to Buy reflects a comprehensive improvement across four key parameters: quality, valuation, financial trend, and technicals. Reliable Data Services Ltd’s strong financial growth, attractive valuation metrics, and bullish technical indicators combine to present a compelling investment case.

Investors should note the company’s ability to sustain its growth trajectory, particularly given its efficient debtor management and expanding profitability. The stock’s current price near its 52-week high suggests positive market sentiment, but investors should remain mindful of broader market volatility and sector-specific risks.

Overall, the upgrade signals that Reliable Data Services Ltd is well-positioned to capitalise on its momentum, making it a noteworthy candidate for portfolios seeking exposure to high-growth NBFC mid-caps with solid fundamentals.

Summary of Key Metrics

• Mojo Score: 74.0 (Upgraded to Buy from Hold)

• Market Cap Grade: 4 (Mid Cap)

• ROCE: 15.4%

• Enterprise Value to Capital Employed: 2.1

• PAT Growth (6 months): 53.13%

• PBT less Other Income Growth (Quarterly): 74.14%

• Debtors Turnover Ratio (Half Year): 2.10 times

• 1-Year Stock Return: 127.64% vs Sensex 9.10%

• PEG Ratio: 0.1

Technical Indicators at a Glance

• Moving Averages (Daily): Bullish

• Bollinger Bands (Weekly): Bullish

• OBV (Weekly & Monthly): Bullish

• MACD (Weekly): Mildly Bearish

• KST (Weekly): Mildly Bearish

• Dow Theory (Weekly): Mildly Bullish

Valuation and Market Position

Reliable Data Services Ltd’s valuation remains compelling relative to peers, trading at a discount while delivering superior earnings growth. The company’s market capitalisation and sector positioning provide a solid foundation for continued expansion, supported by promoter stability and operational efficiency.

Conclusion

The upgrade of Reliable Data Services Ltd’s investment rating to Buy is well justified by its improved technical outlook, attractive valuation, robust financial trends, and strong quality metrics. Investors looking for a mid-cap NBFC with proven growth and momentum would do well to consider this stock as part of a diversified portfolio.

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