Reliance Infrastructure Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals

Reliance Infrastructure, a midcap company in the power industry, has recently been downgraded to a 'Sell' by MarketsMOJO on February 27, 2024. This decision was based on weak long-term fundamental strength, with a -159.37% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 17.95 times, indicating a low ability to service debt. The return on equity (avg) of 6.83% also signifies low profitability per unit of shareholders' funds.
In the latest quarter, the company's results were flat, with a fall of -83.1% in PAT(Q) and -11.2% in NET SALES(Q). Despite its size, domestic mutual funds hold only 0.09% of the company, which could indicate their discomfort with the price or the business.

On the other hand, the stock is technically in a bullish range and has shown improvement since February 14, 2024, generating -3.98% returns. Multiple factors, such as MACD, KST, and OBV, are also bullish for the stock.

With a ROCE of -1.2, the stock has a fair valuation with a 1 Enterprise value to Capital Employed. It is currently trading at a discount compared to its average historical valuations. However, despite generating a return of 73.25% in the past year, the company's profits have fallen by -55.6%.

On a positive note, Reliance Infrastructure has consistently outperformed BSE 500 in the last 3 annual periods, generating 73.25% returns. However, considering the recent downgrade and weak fundamental strength, investors may want to approach this stock with caution.