Sarthak Global Ltd Upgraded to Sell on Technical Improvements Despite Weak Fundamentals

Quality Assessment: Weak Fundamentals Persist

Sarthak Global continues to exhibit weak long-term fundamental strength, which remains a significant concern for investors. The company’s financial results for Q2 FY25-26 were largely flat, with operating losses underscoring ongoing profitability challenges. Over the past five years, net sales have declined at an annualised rate of 28.80%, while operating profit has contracted by 21.40% annually. This negative growth trajectory highlights structural issues within the business model and market positioning.

Moreover, the company’s average Return on Equity (ROE) stands at a modest 4.88%, indicating low profitability relative to shareholders’ funds. This figure is considerably below industry averages, signalling inefficiencies in capital utilisation. The high debt burden further exacerbates risk, with an average Debt to Equity ratio of 4.54 times, reflecting significant leverage that could constrain financial flexibility and increase vulnerability to market fluctuations.

Valuation and Market Performance: Risky Yet Market-Beating Returns

Despite fundamental weaknesses, Sarthak Global’s stock price has delivered impressive returns over the last year, appreciating by 76.96%, substantially outperforming the BSE500 index’s 7.89% return over the same period. This divergence suggests that market sentiment and technical factors have played a pivotal role in driving the stock’s performance.

However, the stock trades at valuations considered risky relative to its historical averages, reflecting elevated expectations that may not be fully supported by earnings growth. Profit growth has been minimal, with only a 1% increase over the past year, raising questions about the sustainability of the recent price rally. The stock’s 52-week high of ₹76.57 contrasts sharply with its current price near ₹30.88, indicating significant volatility and potential downside risk.

Financial Trend: Flat to Negative with Operating Losses

The company’s recent quarterly financials reveal a flat performance, with no significant improvement in revenues or profitability. Operating losses persist, reflecting ongoing operational challenges. The negative EBITDA status further underscores the risk profile of the stock, signalling that core operations are not generating positive cash flow.

Long-term trends remain unfavourable, with declining sales and shrinking operating margins. This trend is unlikely to reverse in the near term without strategic interventions or market tailwinds. Investors should be cautious given the weak financial momentum and the company’s inability to translate revenue into profit effectively.

Technical Analysis: Shift to Mildly Bullish Signals

The primary driver behind the upgrade from Strong Sell to Sell is the improvement in technical indicators, which have shifted from a sideways to a mildly bullish trend. Key technical metrics present a mixed but cautiously optimistic picture:

• MACD: Weekly readings remain mildly bearish, but monthly indicators have turned bullish, suggesting a potential medium-term upward momentum.


• RSI: Both weekly and monthly Relative Strength Index readings show no clear signal, indicating a neutral momentum without overbought or oversold conditions.


• Bollinger Bands: Weekly data is mildly bearish, but monthly bands have turned mildly bullish, signalling reduced volatility and a possible upward price consolidation.


• Moving Averages: Daily moving averages have shifted to mildly bullish, supporting the recent price appreciation and signalling short-term strength.


• KST (Know Sure Thing): Weekly readings remain mildly bearish, but monthly indicators are bullish, aligning with MACD trends.


• Dow Theory: Both weekly and monthly trends remain mildly bearish, indicating that broader market confirmation of a sustained uptrend is still lacking.


• On-Balance Volume (OBV): Weekly and monthly OBV remain bearish, suggesting that volume trends do not fully support the price gains.

Overall, the technical picture is one of cautious optimism, with several monthly indicators turning positive, though weekly signals and volume trends remain subdued. This mixed technical landscape justifies a moderate upgrade in rating but stops short of a full bullish endorsement.

Stock Price and Market Returns Comparison

Sarthak Global’s stock price closed at ₹30.88 on 19 Jan 2026, up 5.00% from the previous close of ₹29.41. The stock’s 52-week range spans from ₹17.45 to ₹76.57, reflecting significant volatility. When compared to the Sensex, the stock has outperformed over multiple time horizons:

• 1 Week: +5.9% vs Sensex -0.01%


• 1 Month: -17.57% vs Sensex -1.31%


• Year-to-Date: -25.96% vs Sensex -1.94%


• 1 Year: +76.96% vs Sensex +8.47%


• 5 Years: +550.11% vs Sensex +70.43%

These figures highlight the stock’s capacity for strong long-term gains despite short-term volatility and fundamental headwinds.

Shareholding and Industry Context

The majority shareholding in Sarthak Global is held by promoters, which can be a double-edged sword. While promoter control can ensure strategic continuity, it may also limit minority shareholder influence. The company operates within the Steel/Sponge Iron/Pig Iron industry, a sector known for cyclical demand and sensitivity to commodity price fluctuations, which adds an additional layer of risk to its outlook.

Conclusion: A Cautious Upgrade Reflecting Technical Recovery Amid Fundamental Weakness

The upgrade of Sarthak Global Ltd’s rating from Strong Sell to Sell primarily reflects an improvement in technical indicators, signalling a mild bullish trend that has emerged after a period of sideways movement. However, the company’s fundamental profile remains weak, characterised by flat financial results, operating losses, high leverage, and poor long-term growth metrics.

Investors should weigh the technical recovery against the underlying financial risks and valuation concerns. While the stock has delivered market-beating returns over the past year, the sustainability of this performance is questionable given the minimal profit growth and elevated risk profile. The cautious upgrade suggests that while the stock may offer some short-term trading opportunities, it remains a risky proposition for long-term investors until fundamental improvements materialise.

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