Sundaram Brake Linings Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and Debt Concerns

Sundaram Brake Linings, a microcap company in the auto ancillary industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 23, 2024. This decision was based on the company's weak long-term fundamental strength, with a -202.94% CAGR growth in operating profits over the last 5 years. Additionally, the company's ability to service its debt is also a concern, with a poor EBIT to Interest (avg) ratio of 0.33.
In terms of financial performance, Sundaram Brake Linings has shown flat results in June 2024, with a PAT (HY) of Rs 2.07 crore, which has seen a decline of -63.43%, and a PBT LESS OI (Q) of Rs 1.39 crore, which has fallen by -32.8%. The company's net sales (Q) have also been at their lowest at Rs 83.71 crore.

Furthermore, with a ROCE of 8.4, the company's valuation is considered expensive with a 3.4 Enterprise value to Capital Employed. However, the stock is currently trading at a discount compared to its average historical valuations. In the past year, the stock has generated a return of 116.10%, while its profits have risen by 893%, resulting in a PEG ratio of 0.1.

On a positive note, the stock is currently in a bullish range and has shown improvement in its technical trend since August 16, 2024, generating a return of 23.29% since then. Multiple technical factors such as MACD, Bollinger Band, KST, DOW, and OBV are also indicating a bullish trend for the stock.

The majority shareholders of Sundaram Brake Linings are the promoters, and the company has shown market-beating performance in both the long term and near term. Along with generating a return of 116.10% in the last year, the stock has also outperformed BSE 500 in the last 3 years, 1 year, and 3 months. However, considering the recent downgrade by MarketsMOJO and the company's weak financial performance, it may be wise for investors to approach this stock with caution.