Tuni Textile Mills Ltd Upgraded to Sell on Improved Valuation and Financial Trends

Valuation Improvement Spurs Upgrade

The primary catalyst for the upgrade was a significant shift in the company’s valuation grade, which moved from “expensive” to “fair.” Tuni Textile Mills currently trades at a price-to-earnings (PE) ratio of 44.75, which, while still elevated, is more reasonable compared to its previous standing and several peers in the textile industry. For context, competitors such as R&B Denims and SBC Exports command PE ratios of 45.29 and 63.74 respectively, both classified as “very expensive.”

Other valuation multiples also support this fair valuation stance. The enterprise value to EBITDA (EV/EBITDA) ratio stands at 20.29, considerably lower than some peers like SBC Exports at 73.18 and Pashupati Cotsp. at 51.38. The EV to capital employed ratio is a modest 1.99, indicating a more balanced capital structure relative to enterprise value. These metrics suggest that the stock is trading at a discount compared to its peer group’s historical valuations, making it more attractive from a price perspective.

Despite the absence of a PEG ratio (0.00) and no dividend yield, the valuation improvement alone has been sufficient to warrant a positive reassessment of the stock’s investment grade.

Financial Trend Shows Signs of Recovery

Financially, Tuni Textile Mills has demonstrated positive momentum in recent quarters. The company reported its highest net sales in a quarter at ₹44.67 crores during Q3 FY25-26, accompanied by a 71% increase in profits over the past year. The latest six-month period saw a profit after tax (PAT) of ₹0.89 crore, signalling improved operational efficiency.

Return on capital employed (ROCE) has also improved, reaching 8.28% in the latest quarter and 8.69% for the half-year period. While these figures remain modest, they represent an upward trend from the company’s average ROCE of 7.02%, which had previously contributed to a weak long-term fundamental strength rating.

However, the company’s ability to service debt remains a concern, with a high debt to EBITDA ratio of 6.60 times. This elevated leverage ratio limits financial flexibility and poses risks if earnings do not continue to improve.

Quality and Technicals Remain Challenging

Despite the upgrade, Tuni Textile Mills retains a Mojo Score of 31.0 and a Mojo Grade of Sell, improved from a previous Strong Sell. The quality grade remains weak due to the company’s consistent underperformance against benchmarks. Over the last three years, the stock has generated a cumulative return of -48.73%, significantly lagging the Sensex’s 36.94% gain over the same period.

In the last year alone, the stock has declined by 39.88%, while the Sensex rose by 6.44%. This persistent underperformance highlights structural challenges within the company’s business model and competitive positioning in the Garments & Apparels sector.

Technically, the stock price has been volatile, closing at ₹1.01 on 6 February 2026, down 4.72% from the previous close of ₹1.06. The 52-week high was ₹1.90, indicating significant downside pressure over the past year. Daily trading ranges remain narrow, with a low of ₹1.01 and a high of ₹1.05 on the latest session, reflecting subdued investor interest and liquidity constraints.

Market Capitalisation and Shareholding

Tuni Textile Mills holds a market cap grade of 4, indicating a micro-cap status with limited market capitalisation relative to larger peers. The majority of shares are held by non-institutional investors, which may contribute to higher volatility and less analyst coverage. This ownership structure can impact the stock’s liquidity and price discovery mechanisms.

Comparative Industry Context

Within the Garments & Apparels sector, Tuni Textile Mills’ valuation and financial metrics position it as a fair-value option relative to peers, many of which are trading at very expensive multiples. For example, companies like Sumeet Industrie and Pashupati Cotsp. have PE ratios exceeding 70 and 90 respectively, with EV/EBITDA multiples well above 30. In contrast, Tuni Textile’s EV/EBITDA of 20.29 and PE of 44.75 suggest a more reasonable entry point for investors willing to accept the company’s operational risks.

However, the company’s weaker financial health and historical underperformance compared to the BSE500 index and Sensex highlight the need for cautious optimism. Investors should weigh the improved valuation and recent financial gains against the company’s leverage and quality concerns.

Outlook and Investment Considerations

While the upgrade to a Sell rating from Strong Sell reflects progress, it does not yet signal a full turnaround. The company’s improving financial trends and fair valuation provide a foundation for potential recovery, but the weak long-term fundamentals and technical underperformance remain significant headwinds.

Investors should monitor upcoming quarterly results closely, particularly for sustained improvements in ROCE, debt servicing capacity, and profit margins. Additionally, any strategic initiatives to reduce leverage or enhance operational efficiency could further support a positive re-rating.

Given the stock’s micro-cap status and majority non-institutional ownership, liquidity risks and price volatility are likely to persist. As such, Tuni Textile Mills may be more suitable for investors with a higher risk tolerance and a longer investment horizon focused on turnaround potential.

Summary of Ratings and Scores

Tuni Textile Mills Ltd’s current Mojo Score stands at 31.0, with a Mojo Grade of Sell, upgraded from Strong Sell on 5 February 2026. The market cap grade remains at 4, reflecting its micro-cap classification. Valuation metrics have improved to a fair grade, while financial trends show positive quarterly momentum. Quality and technical indicators remain weak, underscoring the need for cautious investment consideration.

Conclusion

The recent upgrade in Tuni Textile Mills Ltd’s investment rating is primarily driven by a more attractive valuation and encouraging financial trends, including higher sales and profit growth. However, persistent challenges in quality, leverage, and technical performance temper enthusiasm. Investors should approach the stock with measured optimism, recognising the potential for recovery alongside ongoing risks inherent in this micro-cap textile player.

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