Sakthi Sugars Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt

Sakthi Sugars, a microcap company in the sugar industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 1, 2024. This decision was based on several factors that indicate a weak long-term fundamental strength for the company. One of the main concerns is the high debt of the company, with a debt-equity ratio of 6.5 times. This indicates a low ability to service debt, as seen by the high debt to EBITDA ratio of 13.90 times. Additionally, the company has reported losses, resulting in a negative return on equity. In the latest quarter, the company's results have been flat, with non-operating income accounting for a significant portion of the profit before tax. Furthermore, 76.79% of the promoter shares are pledged, which can put downward pressure on the stock prices in falling markets. This percentage has also increased by 6.02% in the last quarter. On a positive note, the stock is currently in a mildly bullish range and its MACD and KST technical factors are also bullish. However, with a ROCE of only 4.1, the stock is considered to have an attractive valuation with a 1.4 enterprise value to capital employed. It is also trading at a discount compared to its average historical valuations. Despite generating a return of 55.51% in the last year, which is higher than the market (BSE 500) returns of 37.25%, the company's profits have fallen by -6.7%. This raises concerns about its future performance. In conclusion, MarketsMOJO's downgrade of Sakthi Sugars to a 'Sell' is based on the company's weak long-term fundamentals, high debt, and negative return on equity. While the stock may currently be in a mildly bullish range, its performance in the past year and high promoter pledged shares are factors to consider before investing.