RSWM Ltd Reports Strong Sales Amid Long-Term Financial Challenges and High Debt Concerns

RSWM Ltd, a microcap player in the Garments & Apparels industry, has recently undergone an adjustment in evaluation, reflecting the company's current financial landscape. The latest quarter, Q4 FY24-25, showcased positive financial performance, with net sales reaching Rs 1,256.22 crore and operating profit at its highest level of Rs 71.28 crore. Additionally, the operating profit to interest ratio stood at 1.98 times, indicating a favorable position in terms of interest obligations.
However, the company faces challenges in its long-term fundamentals, evidenced by a compound annual growth rate (CAGR) of -1.81% in operating profits over the past five years. The high debt to EBITDA ratio of 8.09 times raises concerns about its ability to service debt, while an average return on equity of 7.15% suggests limited profitability per unit of shareholders' funds.

Despite these challenges, RSWM's valuation appears attractive, with a 0.8 enterprise value to capital employed ratio. The stock has underperformed against the benchmark over the last three years, generating a return of -39.21% in the past year, while domestic mutual funds hold a minimal stake of 0.01%, indicating a cautious stance towards the company.

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