Unichem Laboratories downgraded to 'Hold' by MarketsMOJO due to financial concerns

Unichem Laboratories, a midcap pharmaceutical company, has recently been downgraded to a 'Hold' by MarketsMOJO on November 4th, 2024. This decision was based on the company's latest financial results, which showed a growth in operating profit of 50.35% in June 2024. The company has also reported positive results for the last three consecutive quarters, with the highest operating cash flow of Rs 16.69 crore.
Despite these positive results, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and KST indicating a bullish trend. The majority shareholders of the company are promoters, and it has shown market-beating performance in both the long term and near term. In the last year, the stock has generated a return of 114.75%, outperforming the BSE 500 index in the last three years, one year, and three months.

However, there are some concerns regarding the company's financial health. Unichem Laboratories has a high debt to EBITDA ratio of 4.50 times, indicating a low ability to service debt. Additionally, the company has reported losses, leading to a negative return on capital employed (ROCE). Furthermore, the company has shown poor long-term growth, with net sales growing at an annual rate of 6.92% and operating profit at 15.11% over the last five years.

With a ROE of -0.5, the stock is currently trading at a very expensive valuation with a price to book value of 2.6. However, it is currently trading at a discount compared to its average historical valuations. While the stock has generated a significant return of 114.75% in the past year, its profits have only risen by 97.9%. Based on these factors, MarketsMOJO has downgraded the stock to a 'Hold' recommendation.