Current Rating and Its Significance
MarketsMOJO’s current rating of 'Hold' for SP Apparels Ltd. indicates a balanced view on the stock, suggesting that investors should maintain their existing positions rather than aggressively buying or selling. This rating reflects a comprehensive evaluation of the company’s quality, valuation, financial trends, and technical outlook as of today. The 'Hold' status implies that while the stock has attractive features, certain risks or market conditions warrant a cautious approach.
Quality Assessment
As of 07 January 2026, SP Apparels demonstrates a solid quality grade, reflecting its operational strength and financial discipline. The company maintains a low Debt to EBITDA ratio of 1.26 times, signalling a strong ability to service its debt obligations without undue strain. This prudent leverage level supports financial stability and reduces risk for investors.
Moreover, the company has exhibited healthy long-term growth, with net sales increasing at an annualised rate of 21.65% and operating profit growing at 28.27%. These figures underscore the firm’s capacity to expand its business and improve profitability consistently. The recent half-year results further reinforce this quality, with a Return on Capital Employed (ROCE) reaching 14.54%, which is a robust indicator of efficient capital utilisation.
Valuation Perspective
SP Apparels currently holds a very attractive valuation grade. The stock trades at an Enterprise Value to Capital Employed ratio of just 1.7, which is notably lower than the average historical valuations of its peers in the garments and apparels sector. This discount suggests that the market may be undervaluing the company relative to its capital base and earnings potential.
Despite the stock’s underperformance over the past year, with a return of -26.96% as of today, the company’s profits have risen by 28.5% during the same period. This divergence is reflected in a PEG ratio of 0.6, indicating that the stock’s price does not fully capture its earnings growth prospects. For value-oriented investors, this presents a compelling case to consider the stock for its potential upside once market sentiment improves.
Financial Trend Analysis
The financial trend for SP Apparels remains positive. The company’s quarterly net sales reached a high of ₹427.34 crores recently, and its debtors turnover ratio stands at an impressive 6.87 times, highlighting efficient receivables management. These metrics point to strong operational momentum and effective working capital management.
Institutional investors hold a significant 21.28% stake in the company, which often signals confidence from sophisticated market participants who have the resources to analyse fundamentals thoroughly. This institutional backing can provide stability and support for the stock in volatile market conditions.
Technical Outlook
From a technical standpoint, the stock currently exhibits bearish tendencies. Recent price movements show a decline of 0.56% on the latest trading day and a one-month drop of 9.12%. Over six months, the stock has fallen by 18.11%, reflecting short-term selling pressure and subdued market sentiment.
While the technical grade is bearish, it is important for investors to weigh this against the company’s strong fundamentals and attractive valuation. The technical weakness may present a buying opportunity for those with a longer-term horizon, provided the company’s operational performance continues to improve.
Market Performance Context
SP Apparels has underperformed the broader market significantly over the past year. The BSE500 index has delivered a positive return of 7.74% during this period, whereas SP Apparels has generated a negative return of -23.95%. This underperformance highlights the challenges the stock faces in regaining investor confidence despite its solid fundamentals.
Investors should consider this relative weakness carefully, balancing the company’s growth prospects and valuation against prevailing market trends and technical signals.
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What This Rating Means for Investors
The 'Hold' rating for SP Apparels Ltd. suggests that investors should adopt a measured stance. The company’s strong quality metrics and very attractive valuation provide a solid foundation for potential future gains. However, the bearish technical outlook and recent underperformance relative to the market advise caution.
Investors currently holding the stock may consider maintaining their positions while monitoring market developments and company performance closely. New investors might wait for clearer technical signals or further fundamental improvements before committing fresh capital.
Overall, the rating reflects a balanced view that recognises both the strengths and challenges facing SP Apparels in the current market environment.
Summary of Key Metrics as of 07 January 2026
- Mojo Score: 53.0 (Hold)
- Debt to EBITDA Ratio: 1.26 times
- Net Sales Growth (Annualised): 21.65%
- Operating Profit Growth (Annualised): 28.27%
- ROCE (Half Year): 14.54%
- Debtors Turnover Ratio (Half Year): 6.87 times
- Enterprise Value to Capital Employed: 1.7
- PEG Ratio: 0.6
- Institutional Holdings: 21.28%
- Stock Returns: 1Y -26.96%, 6M -18.11%, 1M -9.12%
These figures collectively underpin the current 'Hold' rating, reflecting a company with solid fundamentals and valuation but facing near-term technical headwinds and market challenges.
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