Riddhi Corporate Services Ltd Upgraded to Hold on Improved Technicals and Financial Performance

Quality Assessment: Mixed Signals but Improving Fundamentals

Riddhi Corporate’s quality parameters present a nuanced picture. The company has demonstrated a very positive financial performance in Q2 FY25-26, with net profit soaring by 103.27% to ₹3.11 crores. This marks the fifth consecutive quarter of positive results, underscoring a sustained recovery trajectory. The return on capital employed (ROCE) for the half-year period reached a robust 20.24%, the highest recorded in recent years, indicating efficient utilisation of capital resources.

However, long-term fundamentals remain a concern. The average ROCE over the past five years stands at a modest 6.28%, reflecting weak capital efficiency historically. Operating profit growth has been sluggish, with an annualised rate of just 2.49% over the last five years. Additionally, the company’s ability to service debt is under pressure, with an average EBIT to interest coverage ratio of 0.84, signalling vulnerability in meeting interest obligations. The debt-equity ratio, though improved to a low 0.59 times, still warrants monitoring.

Valuation: Attractive but Requires Caution

From a valuation standpoint, Riddhi Corporate appears compelling. The company’s ROCE of 6.7% combined with an enterprise value to capital employed ratio of 1.1 suggests undervaluation relative to peers. The stock is trading at a discount compared to the average historical valuations within its sector, offering potential upside for value-oriented investors. Despite this, the price-to-earnings growth (PEG) ratio is reported as zero, which may indicate either a data anomaly or a lack of meaningful growth expectations embedded in the current price.

Over the past year, the stock has delivered a modest return of 0.90%, lagging behind the Sensex’s 9.06% gain. This underperformance contrasts with a remarkable 167.8% increase in profits over the same period, suggesting that the market has yet to fully price in the company’s improving earnings trajectory. Investors should weigh this valuation opportunity against the company’s longer-term growth challenges.

Financial Trend: Strong Quarterly Growth Amidst Long-Term Challenges

The recent financial trend for Riddhi Corporate is decidedly positive. The company’s net profit growth of 103.27% in Q2 FY25-26 is a standout metric, reflecting operational improvements and possibly better market conditions. The return on capital employed (ROCE) for the half-year period at 20.24% is a significant improvement over historical averages, signalling enhanced capital efficiency.

Despite these gains, the company’s long-term financial health remains fragile. The five-year operating profit growth rate of 2.49% is underwhelming, and the weak EBIT to interest coverage ratio of 0.84 highlights ongoing debt servicing risks. Investors should remain cautious about the sustainability of recent gains until longer-term trends show consistent improvement.

Technical Analysis: Shift from Mildly Bearish to Mildly Bullish

The upgrade to Hold is strongly supported by a positive shift in technical indicators. The technical trend has moved from mildly bearish to mildly bullish, reflecting improving market sentiment. Key technical signals include:

• MACD: Weekly remains mildly bearish, but monthly has turned mildly bullish, indicating a longer-term positive momentum.


• RSI: Weekly is bearish, suggesting some short-term caution, while monthly shows no clear signal.


• Bollinger Bands: Both weekly and monthly indicators are bullish, signalling potential upward price movement.


• Moving Averages: Daily averages are bullish, reinforcing short-term strength.


• KST: Weekly remains bearish, but monthly has improved to mildly bullish.


• Dow Theory: No clear trend on weekly or monthly timeframes.

On 1 January 2026, the stock closed at ₹73.05, up 12.56% from the previous close of ₹64.90. The day’s trading range was ₹64.58 to ₹76.95, with the 52-week high at ₹83.00 and low at ₹56.21. These technical improvements have contributed significantly to the upgrade in the stock’s mojo grade from Sell to Hold, with a current Mojo Score of 58.0.

Comparative Performance: Lagging Sensex but Showing Signs of Recovery

When compared to the broader market, Riddhi Corporate’s returns have been mixed. Over the past week and month, the stock outperformed the Sensex by delivering returns of 12.59% and 7.52% respectively, while the Sensex declined marginally. However, over the year-to-date and one-year periods, the stock’s return of 0.90% lagged behind the Sensex’s 9.06% gain.

Longer-term performance remains weak, with a three-year return of -81.57% compared to the Sensex’s 40.07%, and a five-year return of -56.06% against the Sensex’s 78.47%. This stark underperformance highlights the challenges the company has faced historically, though recent quarters suggest a potential turnaround.

Outlook and Investor Considerations

Riddhi Corporate’s upgrade to Hold reflects a cautious but positive reassessment of its prospects. The company’s recent financial results demonstrate a clear improvement in profitability and capital efficiency, while technical indicators suggest a shift towards bullish momentum. Valuation metrics indicate the stock is attractively priced relative to peers, offering potential upside for investors willing to accept some risk.

Nevertheless, investors should remain mindful of the company’s weak long-term fundamentals, including modest operating profit growth and debt servicing challenges. The stock’s historical underperformance relative to the Sensex also warrants consideration. The Hold rating suggests that while the stock is no longer a sell, it may not yet be a compelling buy until further evidence of sustained growth and financial stability emerges.

Majority ownership remains with promoters, which can be a stabilising factor, but also calls for scrutiny of governance and strategic direction. Overall, Riddhi Corporate Services Ltd presents a mixed investment case, with recent improvements balanced against persistent structural weaknesses.

Summary of Ratings and Scores

As of 31 December 2025, the company’s Mojo Grade has been upgraded from Sell to Hold, with a Mojo Score of 58.0. The Market Cap Grade stands at 4, reflecting its micro-cap status within the Computers - Software & Consulting sector. Technical grades have shifted from mildly bearish to mildly bullish, underpinning the upgrade. Investors should monitor upcoming quarterly results and sector developments to reassess the stock’s trajectory.

Conclusion

Riddhi Corporate Services Ltd’s recent upgrade to Hold is driven by a combination of improved technical trends, strong quarterly financial performance, and attractive valuation metrics. While the company’s long-term fundamentals remain challenged, the current momentum and earnings growth provide a foundation for cautious optimism. Investors are advised to keep a close watch on debt metrics and operational trends before committing to a more bullish stance.

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