Vikram Thermo (India) Ltd Upgraded to Hold on Technical Improvements and Financial Stability

Technical Trends Shift to Mildly Bullish

The primary catalyst for the rating upgrade lies in the technical domain, where Vikram Thermo’s trend has shifted from a sideways pattern to a mildly bullish stance. Daily moving averages have turned bullish, supporting a positive near-term momentum. However, the weekly and monthly MACD indicators remain bearish to mildly bearish, indicating that the longer-term momentum is still under pressure.

Other technical signals present a mixed picture: the Relative Strength Index (RSI) on both weekly and monthly charts shows no clear signal, while Bollinger Bands suggest sideways movement weekly and mild bearishness monthly. The KST oscillator remains mildly bearish on both timeframes, but Dow Theory readings have improved to mildly bullish weekly, though no trend is evident monthly. This blend of signals suggests a cautious technical recovery rather than a full-fledged uptrend.

On the price front, Vikram Thermo closed at ₹167.30 on 7 January 2026, up 0.78% from the previous close of ₹166.00. The stock’s 52-week range remains wide, with a high of ₹216.45 and a low of ₹126.85, indicating significant volatility over the past year.

Valuation Remains Expensive Despite Mixed Returns

Vikram Thermo’s valuation continues to be a concern, with a Price to Book (P/B) ratio of 3.8, signalling a premium pricing relative to its book value. This is considered very expensive, especially when juxtaposed with the company’s modest profit growth of 5.9% over the past year and a PEG ratio of 2.7, which suggests the stock is priced for growth that may not fully materialise.

Despite the premium valuation, the stock has underperformed the broader market over the last 12 months, delivering a negative return of -4.43% compared to the BSE500’s positive 7.74%. This underperformance raises questions about the stock’s near-term upside potential, especially given the lack of significant institutional interest; domestic mutual funds hold a negligible 0% stake, indicating limited confidence from professional investors who typically conduct rigorous on-the-ground research.

Financial Trend Shows Stability with Positive Cash Flows

On the financial front, Vikram Thermo has demonstrated encouraging signs. The company reported its highest operating cash flow for the year at ₹23.64 crores in Q2 FY25-26, reflecting strong cash generation capabilities. Additionally, the dividend per share (DPS) reached a peak of ₹1.00, with a dividend payout ratio (DPR) of 38.72%, signalling management’s commitment to returning value to shareholders.

Another positive aspect is the company’s exceptionally low average debt-to-equity ratio of 0.01 times, underscoring a conservative capital structure and minimal financial risk. This low leverage provides flexibility for future growth initiatives or weathering economic downturns without significant strain on the balance sheet.

However, the company’s long-term sales growth remains modest, with a compound annual growth rate (CAGR) of 14.78% over the past five years. While this is respectable, it does not fully justify the current premium valuation, especially when compared to peers in the commodity chemicals sector.

Quality Assessment and Long-Term Returns

Vikram Thermo’s quality metrics present a mixed picture. The company boasts a robust return on equity (ROE) of 24.1%, indicating efficient utilisation of shareholder capital. Over the long term, the stock has delivered impressive returns, with a 3-year return of 139.34%, a 5-year return of 342.01%, and a remarkable 10-year return of 874.94%, significantly outperforming the Sensex benchmarks of 42.01%, 76.57%, and 234.81% respectively.

Despite these strong historical returns, the recent one-year underperformance and the Hold rating reflect caution due to valuation concerns and mixed technical signals. The current Mojo Score of 57.0 and a Mojo Grade of Hold (upgraded from Sell) encapsulate this balanced outlook, suggesting investors should monitor developments closely before committing fresh capital.

Comparative Performance and Market Context

When analysing Vikram Thermo’s returns relative to the Sensex, the stock has outperformed in shorter timeframes but lagged over the last year. For instance, the stock returned 2.39% in the past week and 1.24% over the last month, compared to Sensex returns of 0.46% and -0.76% respectively. Year-to-date, Vikram Thermo has gained 3.56%, while the Sensex is slightly down by 0.18%.

However, the one-year return of -4.43% contrasts sharply with the Sensex’s 9.10% gain, highlighting recent challenges. This divergence underscores the importance of the technical upgrade, which may signal a potential turnaround if sustained.

Longer-term investors may find comfort in the stock’s stellar 3-, 5-, and 10-year returns, which have significantly outpaced the broader market. Yet, the current Hold rating advises prudence given the stock’s premium valuation and recent underperformance.

Conclusion: A Balanced Outlook with Cautious Optimism

The upgrade of Vikram Thermo (India) Ltd’s investment rating from Sell to Hold reflects a careful reassessment of its technical indicators, valuation, financial health, and quality metrics. While technical trends have improved to a mildly bullish stance, longer-term momentum remains mixed. The company’s strong cash flow generation, low debt, and attractive ROE provide a solid foundation, but expensive valuation and recent underperformance temper enthusiasm.

Investors should weigh the stock’s historical outperformance against its current challenges and monitor upcoming quarterly results and market developments closely. The Hold rating suggests that while the stock is no longer a sell, it may not yet offer compelling upside relative to its peers and broader market opportunities.

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