S H Kelkar & Company Ltd Downgraded to Strong Sell Amid Weak Financials and Bearish Technicals

Quality Assessment: Long-Term Growth and Profitability Under Pressure

The company’s quality metrics have come under scrutiny following a series of weak financial results. Over the past five years, S H Kelkar & Co. has recorded a modest net sales compound annual growth rate (CAGR) of 13.83%, while operating profit growth has been negligible at 0.70%. These figures fall short of industry benchmarks, highlighting sluggish operational momentum.

More concerning are the recent quarterly results for Q3 FY25-26, which revealed a sharp decline in profitability. Profit Before Tax excluding other income (PBT LESS OI) dropped by 44.6% to ₹14.85 crores compared to the previous four-quarter average. Similarly, Profit After Tax (PAT) plunged 54.4% to ₹10.66 crores. The half-year Return on Capital Employed (ROCE) also hit a low of 7.42%, underscoring deteriorating capital efficiency.

These financial setbacks have contributed to a downgrade in the company’s quality grade, reflecting concerns over its ability to sustain growth and generate shareholder value in the near to medium term.

Valuation: Attractive but Reflective of Underperformance

Despite the negative earnings trajectory, S H Kelkar & Co. maintains an attractive valuation profile relative to its peers. The stock trades at an Enterprise Value to Capital Employed (EV/CE) ratio of 1.4, signalling a discount compared to historical averages within the Specialty Chemicals sector. This valuation discount partly reflects the market’s cautious stance given the company’s recent underperformance.

Moreover, the company’s low average Debt to Equity ratio of 0.50 times provides a degree of financial stability, mitigating some risk concerns. However, the valuation appeal is tempered by the stock’s poor return profile, having delivered a negative 14.79% return over the past year, significantly underperforming the BSE Sensex’s 10.29% gain during the same period.

Investors should weigh the valuation advantage against the company’s faltering fundamentals and subdued growth outlook.

Financial Trend: Negative Momentum Evident in Recent Performance

The financial trend for S H Kelkar & Co. has deteriorated markedly, with key profitability metrics showing steep declines. The company’s quarterly earnings have fallen sharply, with PAT down by over half compared to the previous four-quarter average. This negative earnings momentum is reflected in the stock’s price performance, which has declined 16.17% year-to-date and 14.79% over the last 12 months.

When benchmarked against the broader market, the stock’s returns lag significantly. Over the past year, the BSE Sensex has gained 10.29%, while S H Kelkar & Co. has lost value. Even over a three-year horizon, the stock’s 36.02% return trails the Sensex’s 38.36%, and over five and ten years, the underperformance is more pronounced.

These trends highlight the company’s struggle to generate consistent shareholder returns and raise questions about its near-term recovery prospects.

Technical Analysis: Bearish Signals Trigger Downgrade

The downgrade to Strong Sell was primarily driven by a shift in technical indicators, which have turned more bearish across multiple timeframes. The technical grade changed from mildly bearish to outright bearish, signalling increased downside risk.

Key technical metrics include:

• MACD: Both weekly and monthly Moving Average Convergence Divergence indicators are bearish, indicating downward momentum.
• Bollinger Bands: Weekly readings are bearish, with monthly bands mildly bearish, suggesting price volatility skewed to the downside.
• Moving Averages: Daily moving averages confirm a bearish trend, reinforcing short-term weakness.
• KST (Know Sure Thing): Mixed signals with weekly mildly bullish but monthly mildly bearish, reflecting some short-term oscillation amid longer-term weakness.
• Dow Theory: Weekly mildly bearish, monthly no clear trend, indicating uncertainty but a bias towards negative price action.

The stock’s price closed at ₹150.10 on 26 Feb 2026, down 2.09% from the previous close of ₹153.30. It remains closer to its 52-week low of ₹135.35 than the high of ₹275.20, underscoring the prevailing bearish sentiment.

Comparative Performance and Market Context

When analysing S H Kelkar & Co.’s stock returns relative to the broader market, the underperformance is stark. Over the last week, the stock declined 8.56%, significantly worse than the Sensex’s 1.74% drop. Over one month, however, the stock posted a modest 5.26% gain, outperforming the Sensex’s 0.91% rise, though this was insufficient to offset longer-term losses.

Year-to-date and one-year returns remain deeply negative at -16.17% and -14.79%, respectively, while the Sensex gained 10.29% over the same one-year period. Over five and ten years, the stock’s cumulative returns of 25.19% and -36.40% lag the Sensex’s 61.20% and 258.10%, respectively, highlighting persistent underperformance.

This comparative weakness emphasises the challenges facing S H Kelkar & Co. in regaining investor confidence and market share within the Specialty Chemicals sector.

Outlook and Investor Considerations

Given the combination of deteriorating financial results, bearish technical indicators, and underwhelming long-term growth, the downgrade to Strong Sell is a clear signal for investors to exercise caution. While the stock’s valuation metrics suggest some appeal, these are overshadowed by the company’s inability to deliver consistent profitability and positive returns.

Investors should closely monitor upcoming quarterly results and sector developments, as any sustained improvement in earnings or technical momentum could warrant a reassessment. Until then, the prevailing outlook remains negative, with the stock vulnerable to further downside pressure.

Shareholding and Capital Structure

The company’s capital structure remains conservative, with promoters holding a majority stake and an average Debt to Equity ratio of 0.50 times. This low leverage provides some financial stability, but it has not translated into improved operational performance or stock price appreciation.

Summary of Ratings and Scores

As of 25 Feb 2026, S H Kelkar & Company Ltd’s MarketsMOJO Mojo Score stands at 28.0, reflecting a Strong Sell rating, downgraded from Sell. The Market Cap Grade is 3, indicating a mid-tier market capitalisation within its sector. The technical downgrade was the primary catalyst for the rating change, with fundamental weaknesses reinforcing the negative outlook.

Investors seeking exposure to the Specialty Chemicals sector may wish to consider alternative stocks with stronger financial trends and more favourable technical profiles.

Limited Period Only. Start at Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Get 71% Off →