Understanding the Current Rating
The Strong Sell rating assigned to Shanthi Gears Ltd. indicates a cautious stance for investors, suggesting that the stock is expected to underperform relative to the broader market and its peers. This rating is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the company's investment appeal.
Quality Assessment
As of 30 December 2025, Shanthi Gears Ltd. holds an average quality grade. This reflects a moderate level of operational efficiency and business fundamentals. While the company maintains a respectable return on equity (ROE) of 21.5%, indicating effective utilisation of shareholder capital, other quality indicators such as inventory turnover have shown weakness. The inventory turnover ratio for the half-year stands at a low 0.72 times, signalling potential inefficiencies in managing stock levels. Additionally, recent quarterly profit before tax (PBT) and profit after tax (PAT) figures have declined by 22.1% and 11.4% respectively compared to the previous four-quarter average, highlighting challenges in sustaining earnings momentum.
Valuation Considerations
The valuation grade for Shanthi Gears Ltd. is classified as very expensive. Currently, the stock trades at a price-to-book (P/B) ratio of 8.4, which is significantly higher than typical benchmarks for industrial manufacturing companies. This elevated valuation suggests that the market price may not adequately reflect the underlying risks and recent financial performance. Despite generating a modest profit growth of 2.8% over the past year, the stock has delivered a negative return of -5.36% during the same period. The price-to-earnings-to-growth (PEG) ratio stands at an elevated 13.9, further indicating that the stock’s price growth expectations may be overly optimistic relative to its earnings growth prospects.
Register here to know the latest call on Shanthi Gears Ltd.
- - Fundamental Analysis
- - Technical Signals
- - Peer Comparison
Financial Trend Analysis
The financial grade for Shanthi Gears Ltd. is negative, reflecting deteriorating earnings and operational challenges. The company reported a profit before tax of ₹22.74 crores in the latest quarter, down 22.1% from the previous four-quarter average. Similarly, the PAT has fallen by 11.4% to ₹21.51 crores. These declines suggest weakening profitability and potential margin pressures. Furthermore, the stock’s returns have been underwhelming across multiple timeframes: a 1-day decline of 0.44%, 1-month drop of 0.63%, and a 3-month fall of 9.75%. Year-to-date, the stock has lost 7.39%, and over the past year, it has declined by 5.36%. This underperformance extends to longer horizons as well, with the stock lagging the BSE500 index over the last three years, one year, and three months.
Technical Outlook
The technical grade for Shanthi Gears Ltd. is bearish, indicating that the stock’s price momentum and chart patterns are unfavourable. The consistent negative returns over recent periods and the downward trend in price action suggest limited near-term upside potential. This bearish technical stance reinforces the caution advised by the Strong Sell rating, signalling that investors should be wary of further declines or volatility.
Market Position and Investor Interest
Despite being a small-cap company in the industrial manufacturing sector, Shanthi Gears Ltd. has attracted minimal interest from domestic mutual funds, which hold only 0.03% of the company. Given that mutual funds typically conduct thorough on-the-ground research, this low stake may reflect concerns about the company’s valuation, business prospects, or price levels. Such limited institutional participation can contribute to reduced liquidity and heightened price volatility.
Only 1% make it here. This Large Cap from the Gems, Jewellery And Watches sector passed our rigorous filters with flying colors. Be among the first few to spot this gem!
- - Highest rated stock selection
- - Multi-parameter screening cleared
- - Large Cap quality pick
What the Strong Sell Rating Means for Investors
For investors, the Strong Sell rating on Shanthi Gears Ltd. serves as a clear signal to exercise caution. It suggests that the stock currently faces significant headwinds across multiple dimensions, including valuation, earnings performance, and technical momentum. Investors should carefully consider these factors before initiating or maintaining positions in the stock. The rating implies that the risk of capital loss is elevated relative to potential gains, and that alternative investment opportunities may offer more favourable risk-reward profiles.
Summary of Key Metrics as of 30 December 2025
To summarise, the stock’s key metrics as of today are:
- Mojo Score: 21.0 (Strong Sell grade)
- Market Capitalisation: Small-cap segment
- Return on Equity (ROE): 21.5%
- Price to Book Value: 8.4 times
- PEG Ratio: 13.9
- Profit Before Tax (Latest Quarter): ₹22.74 crores, down 22.1%
- Profit After Tax (Latest Quarter): ₹21.51 crores, down 11.4%
- Inventory Turnover Ratio (Half Year): 0.72 times
- Stock Returns: 1Y -5.36%, YTD -7.39%, 3M -9.75%
These figures collectively underpin the Strong Sell rating and highlight the challenges Shanthi Gears Ltd. currently faces in delivering shareholder value.
Looking Ahead
Investors should monitor Shanthi Gears Ltd.’s upcoming quarterly results and any strategic initiatives aimed at improving operational efficiency and profitability. Given the current valuation and financial trends, a sustained turnaround would be necessary to alter the stock’s risk profile and investment appeal. Until such improvements materialise, the Strong Sell rating remains a prudent guide for portfolio decisions.
Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Today
