Rating Overview and Context
On 13 Nov 2025, MarketsMOJO revised the rating for Rico Auto Industries Ltd from 'Hold' to 'Buy', reflecting an improvement in the company’s overall investment appeal. The Mojo Score increased by 7 points, moving from 64 to 71, signalling enhanced confidence in the stock’s prospects. This rating encapsulates a comprehensive evaluation of the company’s quality, valuation, financial trend, and technical outlook.
Here’s How the Stock Looks Today
As of 27 February 2026, Rico Auto Industries Ltd continues to demonstrate robust performance across multiple parameters. The company operates within the Auto Components & Equipments sector and is classified as a microcap stock. Despite its smaller market capitalisation, the stock has delivered impressive returns and shows promising fundamentals that justify its current 'Buy' rating.
Quality Assessment
The company holds an average quality grade, reflecting steady operational efficiency and consistent profitability. Notably, operating profit has grown at an annualised rate of 83.18%, indicating strong underlying business momentum. Furthermore, Rico Auto Industries has reported positive results for the last three consecutive quarters, with profit before tax (PBT) excluding other income reaching ₹21.55 crores, growing at 46.0% compared to the previous four-quarter average. Net profit after tax (PAT) for the quarter stands at ₹15.89 crores, up 45.0% over the same period. These figures underscore the company’s ability to sustain growth and generate shareholder value.
Valuation Perspective
Currently, the company’s valuation is considered attractive. With a return on capital employed (ROCE) of 7.9%, the stock trades at an enterprise value to capital employed ratio of 1.7, which is below the average historical valuations of its peers. This discount suggests that the market has not fully priced in the company’s growth potential. Additionally, the price-to-earnings-to-growth (PEG) ratio stands at a low 0.3, signalling that the stock is undervalued relative to its earnings growth rate. Such valuation metrics make Rico Auto Industries an appealing option for investors seeking growth at a reasonable price.
Financial Trend and Stability
The financial trend for Rico Auto Industries is positive, supported by a healthy debt-equity ratio of 0.92 times as of the half-year period, which is relatively low and indicates prudent leverage management. The company’s consistent profit growth and manageable debt levels provide a solid foundation for sustainable expansion. Over the past year, the stock has generated a remarkable return of 97.06%, while profits have increased by 93.3%, reflecting strong operational execution and market confidence.
Technical Outlook
From a technical standpoint, the stock exhibits a bullish trend. Recent price movements show a 1-month gain of 12.93% and a 3-month gain of 22.24%, with a 6-month return of 47.42%. Although the year-to-date return is slightly negative at -4.51%, the overall momentum remains positive, supported by steady buying interest and favourable chart patterns. The one-day change of -0.72% represents normal market fluctuations and does not detract from the longer-term bullish technical setup.
What This Rating Means for Investors
The 'Buy' rating from MarketsMOJO suggests that Rico Auto Industries Ltd is expected to outperform the broader market and its sector peers over the medium to long term. Investors can interpret this as a recommendation to consider accumulating or holding the stock, given its attractive valuation, solid financial health, and positive technical signals. The rating also implies that the company’s growth prospects and operational quality are sufficient to justify a premium over average market returns.
Sector and Market Position
Operating in the Auto Components & Equipments sector, Rico Auto Industries benefits from the ongoing demand for automotive parts driven by both domestic and export markets. The company’s microcap status offers potential for significant upside as it scales operations and capitalises on sector growth trends. Its current valuation discount relative to peers further enhances its appeal as a growth-oriented investment within this space.
This week's revealed pick, a Large Cap from Public Banks with TARGET PRICE, is already showing movement! Get the complete analysis before it's too late.
- - Target price included
- - Early movement detected
- - Complete analysis ready
Investor Considerations and Risks
While the current outlook is positive, investors should remain mindful of sector-specific risks such as fluctuations in raw material costs, regulatory changes, and cyclical demand patterns in the automotive industry. Additionally, as a microcap stock, liquidity and volatility may be higher compared to larger peers. Nonetheless, the company’s strong fundamentals and valuation cushion provide a degree of risk mitigation.
Summary
In summary, Rico Auto Industries Ltd’s 'Buy' rating reflects a balanced assessment of its average quality, attractive valuation, positive financial trend, and bullish technical indicators. The company’s impressive profit growth, reasonable leverage, and discounted valuation relative to peers make it a compelling choice for investors seeking exposure to the auto components sector. The rating update on 13 Nov 2025 marked a shift in sentiment, and as of 27 February 2026, the stock continues to validate this positive outlook through strong returns and operational performance.
Final Thoughts
For investors evaluating opportunities in the auto components space, Rico Auto Industries Ltd offers a blend of growth potential and value. The MarketsMOJO 'Buy' rating serves as a guidepost indicating that the stock is well-positioned to deliver favourable returns, supported by solid fundamentals and technical strength. Monitoring ongoing quarterly results and sector developments will be key to assessing the sustainability of this positive trajectory.
Limited Period Only. Start at Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Get 71% Off →
