Vivid Global Industries Ltd Upgraded to Hold on Technical and Financial Improvements

Technical Trends Spark Upgrade

The primary catalyst for the rating change is the marked improvement in the company’s technical grade, which has shifted from mildly bullish to bullish. Key technical indicators underpinning this upgrade include a weekly MACD reading that remains bullish and a monthly MACD that is mildly bullish, signalling sustained positive momentum. The daily moving averages also support this positive outlook, showing a bullish trend that suggests upward price movement in the near term.

Other technical signals present a mixed but generally positive picture. The weekly Bollinger Bands indicate mild bullishness, although the monthly bands show mild bearishness, reflecting some volatility in longer-term price action. The KST (Know Sure Thing) indicator is bullish on a weekly basis and mildly bullish monthly, while the Dow Theory readings are mildly bullish monthly but show no clear trend weekly. The RSI readings, however, do not currently signal overbought or oversold conditions, suggesting room for further price appreciation without immediate risk of reversal.

Despite a slight dip in the stock price on the day of the upgrade (-1.41%), the technical momentum has been strong enough to warrant a reassessment of the stock’s outlook. The current price stands at ₹17.50, close to its 52-week high of ₹20.00, and well above the 52-week low of ₹12.18, indicating a recovery phase.

Financial Trend Shows Positive Momentum

Financially, Vivid Global has demonstrated encouraging signs in recent quarters. The company reported its highest operating cash flow in the last fiscal year at ₹2.18 crores, underscoring improved cash generation capabilities. Net sales for the quarter ending September 2025 surged by 45.2% to ₹13.92 crores, a significant acceleration compared to the previous four-quarter average. Profit before depreciation, interest and taxes (PBDIT) also reached a quarterly high of ₹0.59 crores, reflecting operational efficiency gains.

These positive financial trends have contributed to a more favourable outlook despite some lingering concerns. The company’s return on equity (ROE) stands at 3.2%, which, while modest, supports a fair valuation with a price-to-book ratio of 1.0. The PEG ratio of 0.5 further suggests that the stock is undervalued relative to its earnings growth potential, given that profits have risen by 19% over the past year.

Quality Assessment and Long-Term Challenges

Despite recent improvements, Vivid Global’s long-term fundamental strength remains weak. The company has experienced a negative compound annual growth rate (CAGR) of -18.17% in operating profits over the past five years, signalling structural challenges in sustaining profitability. Additionally, the company’s ability to service debt is limited, with an average EBIT to interest coverage ratio of just 0.74, indicating potential financial vulnerability.

Return on equity averaged 4.84% over the last five years, reflecting low profitability relative to shareholders’ funds. This weak fundamental backdrop has contributed to the stock’s underperformance against benchmarks such as the BSE500 and Sensex. Over the last three years, Vivid Global has consistently lagged the broader market, with a three-year return of -33.96% compared to Sensex’s 37.97%. The one-year return also remains negative at -4.27%, while the Sensex gained 8.61% in the same period.

Valuation Remains Attractive Despite Risks

From a valuation standpoint, the stock is trading at a discount relative to its peers’ historical averages. The price-to-book value of 1.0 suggests that the market is pricing the company fairly, if cautiously, given its mixed financial and operational profile. The PEG ratio of 0.5 further indicates that the stock may be undervalued relative to its earnings growth, offering potential upside if the company can sustain its recent momentum.

Majority shareholding remains with non-institutional investors, which may influence liquidity and trading dynamics. Investors should weigh the company’s improving technical outlook and recent financial gains against its longer-term fundamental weaknesses and historical underperformance.

Stock Performance Relative to Market Benchmarks

Examining the stock’s recent returns relative to the Sensex highlights the challenges and opportunities for investors. Over the past week, Vivid Global outperformed the Sensex with a 7.63% gain versus the benchmark’s -0.39%, signalling short-term strength. Similarly, the one-month and year-to-date returns of 2.64% and 4.92% respectively also outpace the Sensex’s negative returns of -3.74% and -3.95% over the same periods.

However, the longer-term picture remains less favourable. The stock’s one-year return of -4.27% contrasts with the Sensex’s 8.61% gain, while the three-year and five-year returns of -33.96% and -15.05% lag significantly behind the Sensex’s 37.97% and 72.66%. Even over a decade, the stock’s 42.86% return falls short of the Sensex’s 234.22%, underscoring the need for cautious optimism.

Conclusion: A Cautious Hold with Potential Upside

Vivid Global Industries Ltd’s upgrade to a Hold rating reflects a nuanced assessment of its current position. The bullish technical indicators and recent financial improvements provide a foundation for potential gains, while valuation metrics suggest the stock is attractively priced relative to earnings growth. Nevertheless, the company’s weak long-term fundamentals, debt servicing challenges, and historical underperformance temper enthusiasm.

Investors should consider the stock’s improved technical momentum and operational progress as positive signals but remain mindful of the risks inherent in its financial profile. The Hold rating appropriately balances these factors, signalling that while the stock is no longer a sell, it requires careful monitoring and selective exposure within a diversified portfolio.

Unlock special upgrade rates for a limited period. Start Saving Now →