Reliance Chemotex Industries Receives 'Sell' Rating from MarketsMOJO Due to Weak Financial Performance

Reliance Chemotex Industries, a microcap company in the textile industry, has recently received a 'Sell' rating from MarketsMOJO on January 8, 2024. This downgrade is based on the company's weak ability to service its debt, with a poor EBIT to Interest ratio of 1.87. Additionally, the company has a low Return on Equity of 9.32%, indicating low profitability per unit of shareholders' funds.
The company has also shown poor long-term growth, with a slow annual growth rate of 2.88% in Net Sales and 15.91% in Operating profit over the last 5 years. In fact, in the last quarter, the company declared Very Negative results with a fall in Net Sales of -0.69%. This trend has continued for the last 4 consecutive quarters, with the lowest Operating Cash Flow of Rs -0.04 Cr and a significant increase in Interest expenses at 22.72%.

Institutional investors have also decreased their stake in the company by -1.24% in the previous quarter, holding 0% of the company collectively. This indicates that these investors, who have better resources and capabilities to analyze company fundamentals, have also lost confidence in Reliance Chemotex Industries.

On a positive note, the stock is technically in a Mildly Bullish range, with its MACD and KST technical factors also showing a Bullish trend. However, with a ROCE of 6.7, the stock is currently trading at an attractive valuation with a 1.2 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations. Despite this, the stock has generated a return of 46.22% in the past year, while its profits have fallen by -50.1%.

In the long term, Reliance Chemotex Industries has shown market-beating performance, outperforming the BSE 500 index in the last 3 years, 1 year, and 3 months. However, with the recent downgrade and weak financial performance, it is important for investors to carefully consider their investment in this microcap company.