Shaily Engineering Plastics downgraded to 'Hold' by MarketsMOJO, despite recent positive performance

Shaily Engineering Plastics, a midcap company in the plastic products industry, has recently been downgraded to a 'Hold' by MarketsMOJO on November 11, 2024. This decision was based on various factors, including the company's recent financial results and technical indicators.
In September 2024, Shaily Engineering Plastics reported a 25.9% growth in net profit, indicating a positive performance. This trend has been consistent for the past four quarters, with the company's operating profit to interest ratio being the highest at 8.89 times and return on capital employed at 15.93%. Additionally, the company's net sales for the quarter were the highest at Rs 192.00 crore.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple indicators such as MACD, Bollinger Band, KST, DOW, and OBV showing a bullish trend. Furthermore, institutional investors have increased their stake in the company by 3.93% in the previous quarter, collectively holding 15.46% of the company. This indicates their confidence in the company's fundamentals and potential for growth.

However, despite its recent positive performance, Shaily Engineering Plastics has shown poor long-term growth with net sales and operating profit growing at an annual rate of 4.69% and 6.77%, respectively, over the last five years. Additionally, with a ROCE of 15.6, the company's valuation is considered very expensive with an enterprise value to capital employed ratio of 8.1.

On the other hand, the stock is currently trading at a discount compared to its average historical valuations. While it has generated a return of 213.26% in the past year, its profits have only risen by 87.5%, resulting in a PEG ratio of 0.8.

In conclusion, while Shaily Engineering Plastics has shown positive results in the short term and has the support of institutional investors, its long-term growth and expensive valuation may be a cause for concern. Investors are advised to hold onto their stocks and monitor the company's performance closely.