Suryalakshmi Cotton Mills Ltd is Rated Sell

Current Rating Overview

MarketsMOJO’s current rating of 'Sell' for Suryalakshmi Cotton Mills Ltd indicates a cautious stance towards the stock. This rating is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. The rating was adjusted on 29 December 2025, with the Mojo Score improving from 28 to 37 points, signalling a slight improvement from a 'Strong Sell' to a 'Sell' grade. Despite this, the recommendation suggests that investors should remain wary of the stock’s near-term prospects.

Here’s How the Stock Looks Today

As of 05 February 2026, Suryalakshmi Cotton Mills Ltd remains a microcap player in the Garments & Apparels sector, with a Mojo Score of 37.0, reflecting a modest improvement but still firmly in the 'Sell' category. The stock has shown mixed price performance recently, with a 1-day gain of 1.83%, a 1-week rise of 16.33%, and a 1-month increase of 2.80%. However, longer-term returns remain negative, with a 3-month decline of 1.14%, a 6-month drop of 11.02%, and a 1-year loss of 20.64%. Year-to-date, the stock has gained 1.98%, indicating some short-term recovery but still under pressure overall.

Quality Assessment

The company’s quality grade is assessed as average. This reflects moderate operational efficiency but highlights concerns in management effectiveness and profitability. The Return on Capital Employed (ROCE) stands at a low 8.68%, signalling limited profitability generated from the total capital invested in the business. Similarly, the Return on Equity (ROE) is weak at 1.96%, indicating that shareholders are receiving minimal returns on their investments. These figures suggest that the company struggles to convert capital into meaningful profits, which is a critical consideration for investors seeking quality growth.

Valuation Perspective

Valuation is currently very attractive, which is a positive aspect for potential investors. The stock’s low valuation metrics imply that it is priced below what might be expected given its assets and earnings potential. This could present an opportunity for value-oriented investors who are willing to accept the risks associated with the company’s financial and operational challenges. However, attractive valuation alone does not offset the concerns raised by other parameters.

Financial Trend and Stability

The financial trend for Suryalakshmi Cotton Mills Ltd is negative, reflecting ongoing challenges in sustaining growth and profitability. The company’s net sales have grown at an annual rate of 14.28% over the past five years, which is moderate but not robust enough to offset other weaknesses. A significant concern is the company’s high Debt to EBITDA ratio of 4.04 times, indicating a heavy debt burden relative to earnings before interest, taxes, depreciation, and amortisation. This raises questions about the company’s ability to service its debt obligations comfortably.

Recent quarterly results further underline financial stress. Operating cash flow for the year is at a low ₹7.76 crores, while the profit after tax for the latest quarter is ₹0.31 crores, down 73.6% compared to the previous four-quarter average. Cash and cash equivalents at half-year stand at ₹7.38 crores, the lowest level recorded, which may constrain operational flexibility and investment capacity.

Technical Analysis

The technical grade is mildly bearish, reflecting cautious market sentiment. Despite some short-term price gains, the stock’s longer-term trend remains weak, with negative returns over six months and one year. The mild bearishness suggests that while there may be sporadic rallies, the overall momentum does not support a sustained upward trajectory at present.

What This Rating Means for Investors

A 'Sell' rating from MarketsMOJO advises investors to consider reducing or avoiding exposure to Suryalakshmi Cotton Mills Ltd at this time. The combination of average quality, very attractive valuation, negative financial trends, and mildly bearish technicals paints a picture of a company facing significant operational and financial headwinds. Investors should weigh the risks of continued underperformance and financial strain against the potential for value recovery.

For those holding the stock, this rating suggests caution and the need to monitor developments closely, particularly improvements in profitability, debt servicing capacity, and cash flow generation. New investors might prefer to wait for clearer signs of financial stability and operational turnaround before committing capital.

Sector and Market Context

Suryalakshmi Cotton Mills Ltd operates within the Garments & Apparels sector, a space characterised by intense competition and sensitivity to raw material costs and consumer demand cycles. The company’s microcap status means it is more vulnerable to market volatility and liquidity constraints compared to larger peers. Investors should consider sector dynamics and broader economic factors when evaluating the stock’s prospects.

Summary of Key Metrics as of 05 February 2026

To summarise, the key financial and operational metrics that underpin the current 'Sell' rating include:

• Mojo Score: 37.0 (Sell grade)
• Return on Capital Employed (ROCE): 8.68%
• Return on Equity (ROE): 1.96%
• Debt to EBITDA ratio: 4.04 times
• Operating Cash Flow (Year): ₹7.76 crores
• Profit After Tax (Latest Quarter): ₹0.31 crores, down 73.6%
• Cash and Cash Equivalents (Half Year): ₹7.38 crores
• Stock Returns: 1D +1.83%, 1W +16.33%, 1M +2.80%, 3M -1.14%, 6M -11.02%, YTD +1.98%, 1Y -20.64%

These figures collectively highlight the challenges faced by the company in generating consistent profitability and managing its financial obligations, despite some short-term price gains.

Investor Takeaway

Investors should approach Suryalakshmi Cotton Mills Ltd with caution given the current 'Sell' rating. While the valuation appears attractive, the underlying financial and operational weaknesses suggest that the stock may continue to face headwinds. Monitoring improvements in cash flow, debt reduction, and profitability will be crucial for any reconsideration of the stock’s investment potential.

Conclusion

In conclusion, the 'Sell' rating assigned to Suryalakshmi Cotton Mills Ltd by MarketsMOJO as of 29 December 2025 remains justified by the company’s current fundamentals and market performance as of 05 February 2026. Investors are advised to carefully evaluate the risks and remain vigilant for any signs of turnaround before increasing exposure to this stock.

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