Sancode Technologies Ltd Upgraded to Sell on Technical Improvements and Market Performance

Quality Assessment: Lingering Fundamental Weaknesses

While Sancode Technologies Ltd operates within the Computers - Software & Consulting sector, its fundamental quality remains under pressure. The company has not declared financial results for the past six months, raising concerns about transparency and operational stability. Over the last five years, operating profit has grown at a modest annual rate of 8.19%, reflecting sluggish long-term growth relative to sector peers.

Moreover, the company’s ability to service debt is notably weak, with an average EBIT to interest ratio of -0.39, indicating that earnings before interest and taxes are insufficient to cover interest expenses. This negative ratio highlights financial stress and raises questions about the sustainability of current operations without restructuring or capital infusion.

Valuation: Risky Despite Market-Beating Returns

From a valuation perspective, Sancode Technologies Ltd appears risky. The stock is trading at elevated levels compared to its historical averages, despite recent volatility. The current price stands at ₹111.10, up 10.00% on the day, but still significantly below its 52-week high of ₹216.20. The price-to-earnings-growth (PEG) ratio is 0.7, which suggests the stock is undervalued relative to its earnings growth; however, this is tempered by inconsistent earnings reporting and weak fundamentals.

Notably, the stock has delivered a remarkable 94.91% return over the past year, vastly outperforming the BSE500 index return of 9.89% during the same period. This market-beating performance is supported by a 125% increase in profits over the last year, signalling some operational improvement despite broader concerns.

Financial Trend: Mixed Signals Amid Positive Quarterly Results

Despite the weak long-term fundamentals, recent quarterly financials have shown some positive signs. In Q2 FY24-25, Sancode Technologies reported its highest quarterly PBDIT at ₹-0.02 crore and PBT less other income at ₹-0.03 crore, both improvements from previous quarters. The company also posted a positive PAT of ₹0.14 crore, marking a turnaround in profitability on a quarterly basis.

However, the absence of declared results over the last six months continues to cast a shadow over the company’s financial trend. The weak long-term growth rate and poor debt servicing capacity remain significant concerns for investors seeking stability and consistent earnings growth.

Technical Analysis: Upgrade Driven by Mildly Bullish Indicators

The primary driver behind the upgrade from Strong Sell to Sell is a shift in technical indicators that suggest a mild bullish trend. The technical grade has improved as the trend moved from sideways to mildly bullish, supported by several key metrics:

• MACD on a weekly basis remains mildly bearish but shows bullish momentum on the monthly chart.


• Relative Strength Index (RSI) on both weekly and monthly charts currently shows no clear signal, indicating a neutral momentum.


• Bollinger Bands indicate mild bearishness weekly but mild bullishness monthly, reflecting short-term volatility with longer-term upward potential.


• Daily moving averages have turned mildly bullish, signalling improving price momentum.


• KST (Know Sure Thing) indicator is bullish on the weekly chart, reinforcing the positive technical outlook.


• Dow Theory assessments remain mildly bearish on both weekly and monthly charts, suggesting some caution remains.

These mixed but improving technical signals have encouraged analysts to revise the Mojo Score to 39.0 and upgrade the Mojo Grade from Strong Sell to Sell as of 28 Jan 2026. The stock’s recent price action, including a 10.00% gain on the day to ₹111.10, reflects this technical optimism.

Comparative Returns: Outperforming Sensex and Sector Benchmarks

When compared with broader market indices, Sancode Technologies Ltd has delivered impressive returns over the last year. The stock’s 94.91% return dwarfs the Sensex’s 8.49% gain over the same period, highlighting strong relative performance despite fundamental challenges.

Shorter-term returns are more volatile, with the stock up 18.13% over the past week but down 25.44% over the last month and 17.4% year-to-date, reflecting market uncertainty and profit-taking. Over longer horizons, data is unavailable, but the company’s recent performance suggests potential for recovery if fundamentals improve.

Outlook and Investor Considerations

Investors should approach Sancode Technologies Ltd with caution. The upgrade to a Sell rating reflects improved technical momentum but does not fully mitigate the risks posed by weak fundamentals and inconsistent financial disclosures. The company’s inability to consistently service debt and modest operating profit growth over five years remain significant red flags.

However, the recent quarterly improvements and strong one-year stock performance suggest that the company may be on a path to recovery if it can sustain earnings growth and improve transparency. The PEG ratio of 0.7 indicates potential undervaluation relative to growth, but this must be weighed against the company’s operational risks.

Given the mixed signals, investors with a higher risk tolerance may consider monitoring the stock for further technical confirmation before committing, while more conservative investors might prefer to wait for clearer fundamental improvements.

Summary of Ratings and Scores

Sancode Technologies Ltd’s current Mojo Score stands at 39.0, with a Mojo Grade of Sell, upgraded from Strong Sell on 28 Jan 2026. The Market Cap Grade is 4, reflecting its mid-cap status within the IT - Software industry. The technical trend has shifted positively, but fundamental and valuation concerns persist.

Conclusion

The recent upgrade in Sancode Technologies Ltd’s investment rating is primarily driven by a mild bullish shift in technical indicators, signalling improving price momentum. However, the company’s fundamental weaknesses, including poor debt servicing ability, weak long-term growth, and lack of recent financial disclosures, continue to weigh heavily on its outlook. Investors should balance the technical optimism with these risks when considering exposure to this stock.

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