Zodiac Energy Ltd Upgraded to Hold on Improved Technicals and Solid Financials

Technical Trends Shift to Mildly Bearish

The primary catalyst for the upgrade stems from a notable shift in Zodiac Energy’s technical grade. Previously classified as bearish, the technical trend has moderated to mildly bearish, indicating a less pessimistic momentum in the stock’s price action. Key technical indicators present a mixed but improving picture. The Moving Average Convergence Divergence (MACD) remains bearish on a weekly basis but has softened to mildly bearish on the monthly chart, suggesting that downward momentum is easing.

Relative Strength Index (RSI) readings on both weekly and monthly timeframes show no clear signals, implying the stock is neither overbought nor oversold. Bollinger Bands continue to reflect mild bearishness, but the Moving Averages on a daily scale remain bearish, highlighting some short-term caution. Meanwhile, the Know Sure Thing (KST) indicator reveals a bullish trend on the monthly chart, contrasting with a bearish weekly reading, and Dow Theory signals a mildly bullish weekly trend with no clear monthly trend. On-Balance Volume (OBV) is mildly bearish weekly but neutral monthly, indicating volume patterns are stabilising.

These technical nuances collectively justify the upgrade to Hold, as the stock appears to be transitioning from a strong downtrend to a more neutral or cautiously optimistic phase.

Valuation Remains Attractive Amid Discount to Peers

Zodiac Energy’s valuation metrics continue to support the Hold rating. The company boasts a Return on Capital Employed (ROCE) of 15.7%, which is considered robust within the construction and industrial equipment sectors. Its Enterprise Value to Capital Employed ratio stands at a modest 2.4, signalling an attractive valuation relative to the capital base.

Despite the stock trading at a significant discount compared to its peers’ historical averages, this undervaluation is tempered by the company’s recent price performance. Over the past year, Zodiac Energy’s share price has declined by 38.47%, substantially underperforming the broader BSE500 index, which has delivered a positive 5.35% return over the same period. However, the company’s PEG ratio of 0.4 suggests that earnings growth is not fully reflected in the current share price, indicating potential value for long-term investors.

Financial Trends Show Strong Growth Momentum

Financially, Zodiac Energy has demonstrated impressive growth in recent quarters, underpinning the upgrade. The company reported net sales of ₹96.78 crores for the quarter ending Q2 FY25-26, marking an 83.40% increase year-on-year. Operating profit surged by 49.21%, reflecting improved operational efficiency and margin expansion.

Profit After Tax (PAT) for the nine months period reached ₹14.81 crores, growing at a rate of 40.91%. This strong earnings growth contrasts with the stock’s price decline, highlighting a disconnect between fundamentals and market sentiment. Additionally, the company declared its highest annual dividend per share (DPS) of ₹0.75, signalling confidence in cash flow stability and shareholder returns.

Quality Assessment and Market Position

Zodiac Energy’s Mojo Score currently stands at 51.0, with a Mojo Grade of Hold, upgraded from a previous Sell rating. The company holds a Market Cap Grade of 4, reflecting its mid-tier market capitalisation within the construction sector. Promoters remain the majority shareholders, providing stability and alignment with long-term value creation.

While the company has underperformed the Sensex and BSE500 indices over the last year, its three-year return of 161.44% significantly outpaces the Sensex’s 40.21%, demonstrating strong long-term growth potential. This divergence suggests that the recent underperformance may be cyclical or sentiment-driven rather than indicative of deteriorating fundamentals.

Stock Price and Market Performance

As of 5 January 2026, Zodiac Energy’s stock price closed at ₹307.85, up 2.07% from the previous close of ₹301.60. The intraday high reached ₹310.70, while the low was ₹299.40. The stock remains well below its 52-week high of ₹563.45 but above the 52-week low of ₹288.75, indicating a consolidation phase.

Short-term returns show mixed results: a one-week gain of 1.77% outperformed the Sensex’s 0.85%, but the one-month return was negative at -7.98%, contrasting with the Sensex’s positive 0.73%. Year-to-date returns are modestly positive at 1.72%, slightly ahead of the Sensex’s 0.64%. These fluctuations reflect ongoing market uncertainty but also suggest emerging resilience.

Outlook and Investor Considerations

The upgrade to Hold reflects a balanced view of Zodiac Energy’s prospects. The company’s strong financial growth and attractive valuation metrics provide a solid foundation, while the technical indicators suggest a stabilising trend after a period of bearishness. However, the stock’s recent underperformance relative to the broader market and some lingering bearish technical signals counsel caution.

Investors should monitor upcoming quarterly results and sector developments closely, as sustained earnings momentum and further technical improvements could pave the way for a future upgrade. Conversely, any deterioration in market conditions or company fundamentals may warrant a reassessment of the rating.

Summary of Rating Change

Zodiac Energy Ltd’s rating was upgraded from Sell to Hold on 2 January 2026, driven primarily by:

• Technical trend improvement from bearish to mildly bearish, with mixed but stabilising indicators.


• Attractive valuation supported by a strong ROCE of 15.7% and a low Enterprise Value to Capital Employed ratio of 2.4.


• Robust financial performance with net sales growth of 83.40% and PAT growth of 40.91% over recent periods.


• Quality metrics reflecting a Mojo Score of 51.0 and a Market Cap Grade of 4, with promoter stability.

This comprehensive assessment underlines a cautious optimism for Zodiac Energy, positioning it as a stock to watch within the construction sector.

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