RSWM Ltd Reports Growth Amidst Financial Challenges and Valuation Concerns
RSWM Ltd, a microcap textile company, recently adjusted its evaluation amid mixed financial results. While it reported a 23.67% increase in net sales for December 2024, challenges persist, including declining operating profits and a high Debt to EBITDA ratio. The company's valuation remains attractive compared to peers.
RSWM Ltd, a microcap player in the textile industry, has recently undergone an adjustment in its evaluation, reflecting the complexities of its financial landscape. The company reported positive financial performance for the quarter ending December 2024, with net sales reaching Rs 3,569.61 crore, marking a growth of 23.67%. Additionally, the operating profit to interest ratio stood at its highest at 1.51 times, and the PBDIT for the quarter was recorded at Rs 50.62 crore.However, underlying trends indicate challenges for RSWM. The company has experienced a significant decline in operating profits over the past five years, with a CAGR of -22.97%. Its ability to service debt is also a concern, highlighted by a high Debt to EBITDA ratio of 8.46 times. The average Return on Equity of 9.09% suggests limited profitability per unit of shareholders' funds.
Despite these challenges, RSWM's valuation appears attractive, with an enterprise value to capital employed ratio of 0.8, and it is trading at a discount compared to its peers' historical valuations. The stock has consistently underperformed against benchmarks over the last three years, generating a return of -25.38% in the past year.
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