Tuni Textile Mills Ltd Downgraded to Strong Sell Amid Bearish Technicals and Expensive Valuation

Technical Trends Turn Bearish

The most significant trigger for the downgrade is the shift in technical grade from mildly bearish to outright bearish. Key technical indicators paint a cautious picture for Tuni Textile Mills. The Moving Average Convergence Divergence (MACD) is bearish on both weekly and monthly charts, signalling downward momentum. Similarly, the KST (Know Sure Thing) indicator aligns with this bearish outlook across weekly and monthly timeframes.

Bollinger Bands also reflect increased selling pressure, with weekly readings mildly bearish and monthly readings firmly bearish. Daily moving averages confirm this trend, showing the stock price consistently below key averages. The Dow Theory assessment remains mildly bearish on both weekly and monthly scales, reinforcing the negative technical sentiment. Meanwhile, the Relative Strength Index (RSI) offers no clear signal, indicating a lack of strong momentum either way.

These technical factors collectively suggest that the stock is under pressure and may face further downside risks in the near term. The stock price closed at ₹1.07 on 12 Feb 2026, up 4.90% on the day but still near its 52-week low of ₹0.92, far below its 52-week high of ₹1.90.

Valuation Profile Shifts to Expensive

Alongside technical deterioration, Tuni Textile Mills’ valuation grade has been downgraded from fair to expensive. The company’s price-to-earnings (PE) ratio stands at a steep 47.41, considerably higher than many peers in the textile industry. Its price-to-book value ratio is 4.02, and enterprise value to EBITDA is 21.11, both indicating a premium valuation.

Return on Capital Employed (ROCE) is modest at 8.28%, while Return on Equity (ROE) is similarly subdued at 8.48%. These returns do not justify the elevated multiples, especially given the company’s weak debt servicing ability, with a high Debt to EBITDA ratio of 6.60 times. The enterprise value to capital employed ratio is 2.07, signalling that the market is pricing in growth expectations that may be difficult to meet.

Compared to industry peers such as R&B Denims and SBC Exports, which are rated very expensive with PE ratios around 47-48 and EV/EBITDA multiples above 35, Tuni Textile Mills is expensive but not the most overvalued. However, its financial fundamentals lag behind these peers, weakening the investment case.

Financial Trend: Mixed Signals Amid Weak Long-Term Fundamentals

Despite the downgrade, Tuni Textile Mills has reported positive financial performance in recent quarters. The company’s net sales for the latest six months reached ₹74.52 crores, growing at an impressive 103.83% year-on-year. Profit after tax (PAT) for the same period rose to ₹0.89 crores, and the half-year ROCE improved to 8.69%, the highest in recent times.

However, these encouraging short-term results contrast with the company’s weak long-term fundamentals. Over the past year, the stock has delivered a negative return of -31.41%, significantly underperforming the Sensex, which gained 10.41% over the same period. Over three years, the stock’s return is down by 43.39%, while the Sensex rose 38.81%. Even over a decade, Tuni Textile Mills’ 114% return pales in comparison to the Sensex’s 267% gain.

The company’s average ROCE over the long term is a modest 7.02%, reflecting limited efficiency in capital utilisation. Coupled with a high debt burden, this raises concerns about sustainable profitability and growth prospects.

Quality Assessment: Weak Fundamentals and Debt Concerns

The quality grade remains poor, reflecting the company’s weak fundamental strength. The high Debt to EBITDA ratio of 6.60 times indicates a stretched balance sheet and limited ability to service debt comfortably. This financial leverage increases risk, especially in a volatile textile sector environment.

While recent quarterly results show improvement, the overall financial health remains fragile. The company’s majority shareholders are non-institutional, which may limit access to strategic capital and support during downturns.

Stock Price Performance and Market Context

Tuni Textile Mills’ stock price has been volatile, closing at ₹1.07 on 12 Feb 2026, up from ₹1.02 the previous day. The stock’s 52-week range is ₹0.92 to ₹1.90, indicating significant price erosion over the past year. The daily trading range on the latest session was ₹1.03 to ₹1.07, showing some intraday buying interest despite the bearish technical backdrop.

Returns over various periods highlight the stock’s underperformance relative to the broader market. While it has delivered a 101.89% return over five years, this is below the Sensex’s 63.46% gain, and the recent negative returns over one month (-28.19%) and year-to-date (-33.95%) underscore near-term challenges.

Outlook and Investor Considerations

Given the combination of bearish technical signals, expensive valuation, weak long-term fundamentals, and high leverage, the downgrade to Strong Sell is a reflection of heightened risk for investors. While recent quarterly results show some operational improvement, the stock’s poor relative performance and stretched balance sheet suggest caution.

Investors should weigh the company’s short-term sales growth and profit gains against its inability to generate consistent returns on capital and the pressure from debt servicing. The stock’s current price near its 52-week low may attract speculative interest, but the overall risk profile remains elevated.

Comparatively, peers in the textile and garments sector with more attractive valuations and stronger financial metrics may offer better risk-adjusted opportunities. The company’s Mojo Grade of Strong Sell and a low Mojo Score of 23.0 reinforce the recommendation to avoid or exit positions at this juncture.

Summary of Rating Changes

The downgrade from Sell to Strong Sell on 11 Feb 2026 was driven primarily by:

• Technical Grade: Downgraded from mildly bearish to bearish due to negative MACD, KST, moving averages, and Bollinger Bands signals.
• Valuation Grade: Shifted from fair to expensive with a PE ratio of 47.41 and EV/EBITDA of 21.11, not supported by modest ROCE of 8.28%.
• Financial Trend: Despite recent quarterly sales and profit growth, long-term returns remain negative and debt levels high.
• Quality Grade: Weak fundamentals and high leverage continue to weigh on the company’s creditworthiness and operational stability.

These factors collectively justify the revised investment stance, signalling investors to exercise caution.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →