Tejnaksh Healthcare Ltd Upgraded to Sell on Technical Improvements Despite Weak Fundamentals

Quality Assessment: Weak Fundamentals Persist

Tejnaksh Healthcare operates within the Healthcare Services sector, specifically in hospital and healthcare services. Despite its critical role, the company’s quality metrics remain subdued. Over the past five years, the company has recorded a negative compound annual growth rate (CAGR) of -1.19% in net sales, signalling stagnation in revenue generation. This flat financial performance was evident in the recent Q2 FY25-26 results, which showed no significant improvement.

Profitability metrics further highlight the company’s struggles. The average Return on Equity (ROE) stands at a modest 9.52%, indicating limited efficiency in generating profits from shareholders’ funds. More recently, the ROE has declined to 6.3%, underscoring deteriorating profitability. Operating cash flow for the year is notably low at ₹0.38 crore, reflecting constrained internal liquidity and operational challenges.

These factors contribute to the company’s weak long-term fundamental strength, which remains a key concern for investors seeking sustainable growth and profitability in the healthcare sector.

Valuation: Attractive but Reflective of Risks

Despite fundamental weaknesses, Tejnaksh Healthcare’s valuation appears attractive relative to its peers. The stock trades at a Price to Book (P/B) ratio of 1.2, which is considered very attractive within the healthcare services industry. This discount to historical peer valuations suggests that the market has priced in the company’s operational challenges and subdued growth prospects.

However, this valuation attractiveness is tempered by the company’s recent financial performance. Over the past year, profits have declined by 25.7%, and the stock has generated a negative return of -35.78%, significantly underperforming the BSE500 benchmark and the broader Sensex, which posted a 6.66% gain over the same period. This persistent underperformance raises questions about the stock’s potential for recovery despite its seemingly favourable valuation.

Financial Trend: Flat to Negative Performance

Tejnaksh Healthcare’s financial trend remains largely flat to negative. The company’s quarterly results have shown little improvement, with Q2 FY25-26 reflecting a continuation of stagnant revenue and profitability. The operating cash flow is at its lowest level, indicating limited financial flexibility to invest in growth or innovation.

Long-term returns paint a bleak picture. Over the last one year, the stock has lost 35.78%, and over three and five years, it has declined by 74.46% and 41.24%, respectively. This contrasts sharply with the Sensex’s robust gains of 37.76% and 65.60% over the same periods. Such consistent underperformance highlights the company’s inability to keep pace with market and sector growth, reinforcing the cautious stance of investors.

Technical Analysis: Shift from Bearish to Mildly Bearish

The primary driver behind the upgrade from Strong Sell to Sell is the improvement in technical indicators. The technical trend has shifted from bearish to mildly bearish, signalling a potential stabilisation in the stock’s price movement. Key technical metrics reveal a nuanced picture:

• MACD (Moving Average Convergence Divergence): Both weekly and monthly MACD readings are mildly bullish, suggesting a nascent positive momentum in price trends.
• RSI (Relative Strength Index): Weekly and monthly RSI readings show no clear signal, indicating neither overbought nor oversold conditions.
• Bollinger Bands: Weekly and monthly bands remain mildly bearish, reflecting ongoing volatility and downward pressure.
• Moving Averages: Daily moving averages are mildly bearish, consistent with a cautious outlook.
• KST (Know Sure Thing): Both weekly and monthly KST indicators remain bearish, highlighting persistent downward momentum.
• Dow Theory: Weekly trend is mildly bearish, while monthly shows no clear trend, suggesting uncertainty in longer-term direction.

Despite mixed signals, the overall technical environment has improved enough to warrant a less severe rating. The stock’s price has also shown resilience, closing at ₹15.60 on 4 Feb 2026, up 3.24% from the previous close of ₹15.11, with a 52-week range between ₹12.55 and ₹26.10.

Comparative Performance: Lagging Behind Benchmarks

Tejnaksh Healthcare’s stock returns have consistently lagged behind the Sensex and sector benchmarks. Over the last week, the stock surged 14.12%, outperforming the Sensex’s 1.79% gain, but this short-term rally contrasts with longer-term underperformance. Over one month, the stock declined by 1.45%, slightly better than the Sensex’s 2.27% fall. Year-to-date, the stock has gained 4.07%, outperforming the Sensex’s negative 1.65% return.

However, over one, three, five, and ten-year periods, the stock has significantly underperformed, losing 35.78%, 74.46%, 41.24%, and 60.00%, respectively, while the Sensex posted gains of 6.66%, 37.76%, 65.60%, and 244.38% over the same intervals. This persistent underperformance underscores the company’s challenges in delivering shareholder value over the long term.

Ownership and Market Capitalisation

Tejnaksh Healthcare’s majority shareholding rests with promoters, which can provide stability in governance but also concentrates control. The company’s market capitalisation grade is rated 4, reflecting a mid-tier market cap within its sector. This positioning influences liquidity and investor interest, particularly in comparison to larger healthcare peers.

Conclusion: A Cautious Upgrade Amidst Lingering Risks

The upgrade of Tejnaksh Healthcare Ltd’s investment rating from Strong Sell to Sell reflects a cautious optimism driven by technical improvements. The shift from a bearish to a mildly bearish technical trend, supported by mildly bullish MACD signals, has tempered the previously negative outlook. However, fundamental weaknesses remain pronounced, with flat financial performance, low profitability, and persistent underperformance against benchmarks.

Valuation metrics offer some solace, with the stock trading at a discount to peers, but this is largely a reflection of the risks priced in by the market. Investors should weigh the improved technical signals against the company’s ongoing operational challenges and subdued financial trends before considering exposure.

As the healthcare services sector continues to evolve, Tejnaksh Healthcare’s ability to reverse its long-term decline and capitalise on sector growth will be critical to any further upgrades in investment rating.

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