Unifinz Capital India Receives 'Hold' Rating After Strong Q2 Results, Concerns Remain

Unifinz Capital India, a microcap finance company, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company declared very positive results for the quarter ending June 2024, with a growth in operating profit of 336.46%. This marks the fifth consecutive quarter of positive results for the company.
The company's net sales for the half-year were reported at Rs 23.97 crore, while its PBDIT for the quarter was the highest at Rs 4.18 crore. Additionally, the PBT less OI for the quarter was also the highest at Rs 2.50 crore. These strong financial results have contributed to the stock's bullish trend, with the technical trend improving from mildly bullish to bullish on October 9, 2024. The key technical factor, MACD, has also been bullish since the same date.

However, there are some concerns regarding the company's long-term fundamental strength. The average return on equity (ROE) for the company is 5.71%, which is considered weak. Furthermore, the operating profit has only grown at an annual rate of 42.61%, indicating poor long-term growth. The stock also has a very expensive valuation with a price to book value of 33.5 and a ROE of 28.1.

Despite these concerns, the stock has outperformed the market (BSE 500) with a return of 810.50% in the last year. However, its profits have only risen by 204%, resulting in a PEG ratio of 0.6. This suggests that the stock is currently trading at a discount compared to its average historical valuations.

It is worth noting that the promoter holding has decreased this quarter and now stands at 66.58% of the company. This could potentially impact the company's future performance. Overall, while the stock has shown strong market-beating performance in the short term, its long-term fundamentals and valuation raise some concerns. Investors may want to hold off on making any significant decisions until there is more clarity on the company's future prospects.