Shricon Industries Ltd Upgraded to Hold on Improved Technicals and Steady Financials

Quality Assessment: Strong Fundamentals Backing the Upgrade

Shricon Industries continues to demonstrate robust fundamental strength, which remains a key pillar supporting the recent rating upgrade. The company boasts an average Return on Equity (ROE) of 21.14%, underscoring its ability to generate healthy profits relative to shareholder equity. This figure is well above industry averages for NBFCs, reflecting efficient capital utilisation and operational effectiveness.

Quarterly financial results for Q2 FY25-26 further reinforce this quality narrative. The company reported its highest-ever Profit Before Depreciation, Interest and Taxes (PBDIT) at ₹0.55 crore, alongside a matching Profit Before Tax less Other Income (PBT less OI) of ₹0.55 crore. Net Profit After Tax (PAT) also reached a peak of ₹0.58 crore, signalling consistent earnings growth. These metrics highlight a positive financial trend that supports the company’s fundamental quality grade.

Valuation: Premium Pricing Reflects Market Confidence but Raises Caution

Despite strong fundamentals, Shricon Industries is currently trading at a premium valuation, which tempers the enthusiasm around the upgrade. The stock’s Price to Book (P/B) ratio stands at 5.8, indicating a very expensive valuation relative to its book value. This is notably higher than the average valuations of its NBFC peers, suggesting that investors are pricing in significant growth expectations.

Moreover, the company’s Price/Earnings to Growth (PEG) ratio is elevated at 12.9, reflecting a disconnect between the stock price and the modest 2% profit growth over the past year. While the stock has delivered an 11.75% return in the last 12 months, this has not been matched by proportional earnings expansion, which could signal overvaluation risks if growth momentum slows.

Financial Trend: Positive Momentum Evident in Quarterly and Long-Term Returns

The financial trend for Shricon Industries has been largely positive, contributing to the upgrade decision. The company’s quarterly results for September 2025 marked record highs in key profitability metrics, signalling operational improvements and effective cost management.

Long-term returns have been particularly impressive. Over the past three years, the stock has generated a staggering 578.58% return, vastly outperforming the Sensex’s 36.79% gain over the same period. Even over five and ten years, Shricon’s returns of 578.58% and 390.77% respectively, dwarf the Sensex’s 68.52% and 240.06% returns. This consistent outperformance highlights the company’s ability to deliver shareholder value over extended periods.

In the most recent year, the stock returned 11.75%, exceeding the Sensex’s 8.65% gain, and year-to-date returns stand at 17.48% compared to a negative 2.32% for the benchmark. These figures reflect a resilient financial trend despite broader market volatility.

Technical Analysis: Upgrade Driven by Bullish Signals Across Multiple Indicators

The most significant catalyst for the rating upgrade was the improvement in Shricon Industries’ technical grade, which shifted from mildly bullish to bullish. This change reflects a more favourable market sentiment and momentum for the stock, supported by a range of technical indicators.

On a weekly basis, the Moving Average Convergence Divergence (MACD) indicator is bullish, signalling upward momentum, although the monthly MACD remains mildly bearish, suggesting some caution over longer-term trends. The Relative Strength Index (RSI) shows no clear signal on both weekly and monthly charts, indicating a neutral momentum in the short term.

Bollinger Bands are bullish on both weekly and monthly timeframes, suggesting the stock price is trending upwards within a healthy volatility range. Daily moving averages also confirm a bullish stance, reinforcing the positive short-term momentum.

The Know Sure Thing (KST) indicator is bullish weekly but mildly bearish monthly, mirroring the mixed signals from MACD. Dow Theory assessments are mildly bullish on both weekly and monthly charts, indicating a gradual strengthening of the trend.

On-Balance Volume (OBV) shows no clear trend weekly and is mildly bearish monthly, suggesting volume support is not yet fully confirmed but not significantly negative either.

Overall, the technical picture has improved sufficiently to warrant an upgrade in the technical grade, which played a pivotal role in the overall Mojo Grade moving from Sell to Hold.

Market Capitalisation and Shareholding Structure

Shricon Industries holds a Market Cap Grade of 4, reflecting its mid-tier market capitalisation within the NBFC sector. The company’s majority shareholders remain the promoters, indicating stable ownership and potential alignment of interests with minority shareholders. This ownership structure often provides a degree of confidence in governance and strategic direction.

Price Performance and Volatility

The stock closed at ₹215.45 on the latest trading day, up 5.00% from the previous close of ₹205.20. It touched a high of ₹215.45 and a low of ₹194.95 during the session, trading near its 52-week high of ₹226.60 and well above its 52-week low of ₹122.55. This price action reflects strong investor interest and relative price stability amid broader market fluctuations.

Conclusion: Hold Rating Reflects Balanced Outlook Amid Growth and Valuation Concerns

The upgrade of Shricon Industries Ltd’s investment rating from Sell to Hold is primarily driven by improved technical indicators and sustained financial performance. The company’s strong ROE, record quarterly profits, and exceptional long-term returns underpin its fundamental quality. However, the elevated valuation metrics and modest profit growth over the past year warrant caution, preventing a more bullish rating at this stage.

Investors should weigh the company’s premium pricing against its consistent outperformance and improving technical momentum. While the Hold rating suggests a neutral stance, it recognises the potential for further gains if the company can sustain its growth trajectory and justify its valuation premium.

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