SRG Housing Finance Ltd Upgraded to Sell on Improved Valuation and Financial Trends

Valuation Upgrade Signals Renewed Investor Interest

The most significant catalyst behind the rating upgrade is the change in SRG Housing’s valuation grade, which has shifted from “expensive” to “attractive.” The company currently trades at a price-to-earnings (PE) ratio of 14.61, a notable improvement compared to its previous valuation status. This PE multiple is considerably lower than many of its peers in the housing finance sector, some of which are classified as “very expensive” with PE ratios exceeding 50 or even 300 in extreme cases.

Other valuation multiples reinforce this positive shift: the price-to-book value stands at 1.54, while enterprise value to EBITDA is 9.87 and EV to EBIT is 10.46. These figures suggest that SRG Housing is now trading at a reasonable premium relative to its earnings and book value, making it more attractive for value-conscious investors. The PEG ratio of 1.40 further indicates that the stock’s price growth is in line with its earnings growth, supporting the case for a more favourable valuation outlook.

Financial Trend: Consistent Growth Amidst Market Challenges

SRG Housing Finance has demonstrated robust financial performance over the recent quarters, with positive results reported for ten consecutive quarters. The company’s profit before tax (PBT) excluding other income for Q3 FY25-26 stood at ₹9.59 crores, reflecting a strong growth rate of 63.37% year-on-year. Net profit after tax (PAT) for the same period was ₹8.21 crores, up 43.0%, while net sales reached a record ₹50.45 crores.

These figures underscore the company’s operational resilience and ability to expand its earnings base despite a challenging macroeconomic environment. However, it is important to note that the average return on equity (ROE) remains modest at 10.54%, which is below the sector’s more robust performers. This moderate ROE, coupled with a return on capital employed (ROCE) of 10.32%, signals steady but unspectacular profitability.

Quality Assessment: Weak Long-Term Fundamentals Temper Optimism

Despite the encouraging short-term financial trends, SRG Housing’s overall quality rating remains subdued. The company’s long-term fundamental strength is considered weak, primarily due to an average ROE of 13.64% over recent years, which is below the threshold typically favoured by investors seeking high-quality growth stocks. This metric suggests that while the company is profitable, it has not consistently generated superior returns on shareholder equity.

Moreover, the stock has underperformed the broader market significantly over the past year. While the BSE500 index delivered a 9.00% return in the last 12 months, SRG Housing’s share price declined by 14.69%. This underperformance highlights investor caution and reflects concerns about the company’s ability to sustain growth momentum in a competitive housing finance sector.

Technicals: Modest Recovery Amid Volatility

From a technical perspective, SRG Housing’s stock price has shown some resilience in recent sessions. The share closed at ₹273.85 on 10 Feb 2026, up 2.14% from the previous close of ₹268.10. The stock’s 52-week trading range spans from ₹251.60 to ₹371.80, indicating a relatively wide volatility band. Today’s intraday high of ₹280.00 suggests some buying interest, although the stock remains below its yearly peak.

Longer-term returns paint a mixed picture. While the stock has delivered impressive gains over a 10-year horizon with a 265.13% return, it has lagged the Sensex over the last year and year-to-date periods. This divergence between long-term outperformance and short-term weakness may reflect cyclical pressures in the housing finance industry and investor rotation towards other sectors.

Peer Comparison and Market Positioning

When compared with its sector peers, SRG Housing’s valuation appears more attractive but its financial metrics are middling. For instance, GIC Housing Finance is rated “Very Attractive” with a PE of 5.9 and a PEG ratio of zero, indicating no expected growth premium. Star Housing Finance also enjoys a “Very Attractive” valuation with a PE of 9.45 and EV/EBITDA of 6.77, outperforming SRG Housing on these fronts.

Conversely, several competitors such as India Home Loans, Sahara Housing, and Parshwanath Corporation are classified as “Very Expensive,” trading at PE multiples above 50, which may justify SRG Housing’s relative appeal for value investors. However, some peers are loss-making, which complicates direct comparisons.

Outlook and Investment Considerations

SRG Housing Finance’s upgrade to a Sell rating reflects a nuanced view balancing improved valuation and recent earnings growth against persistent fundamental weaknesses and market underperformance. Investors should weigh the company’s attractive price multiples and steady quarterly profit growth against its modest return on equity and competitive pressures within the housing finance sector.

Given the stock’s mixed performance and sector dynamics, cautious investors may consider the Sell rating as an indication to monitor the company closely for further improvements in quality metrics and market momentum before committing additional capital.

Summary of Key Metrics:

• Current Price: ₹273.85 (up 2.14% on 10 Feb 2026)
• PE Ratio: 14.61 (Valuation upgraded to Attractive)
• Price to Book Value: 1.54
• EV/EBITDA: 9.87
• PEG Ratio: 1.40
• ROE (Latest): 10.54%
• ROCE (Latest): 10.32%
• Profit Before Tax (Q3 FY25-26): ₹9.59 crores (+63.37%)
• Net Profit After Tax (Q3 FY25-26): ₹8.21 crores (+43.0%)
• Net Sales (Q3 FY25-26): ₹50.45 crores (highest recorded)
• 1-Year Stock Return: -14.69% vs BSE500 +9.00%

Conclusion

SRG Housing Finance Ltd’s recent upgrade from Strong Sell to Sell by MarketsMOJO reflects a more balanced assessment of its investment potential. The company’s attractive valuation and consistent quarterly earnings growth provide a foundation for cautious optimism. However, the weak long-term fundamental strength and recent market underperformance warrant prudence. Investors should continue to monitor the company’s financial trends and sector developments closely to determine if further upgrades are justified in the future.

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