Garnet International Falls 3.66%: Profit Collapse and Downgrade Drive Weakness

16 February: Profit Collapse Raises Red Flags

Garnet International opened the week at Rs.63.47 but closed lower at Rs.63.11, down 0.57% on 16 February. This decline coincided with the release of the company’s Q3 FY26 results, which revealed a sharp profit collapse despite a nine-month surge in earnings. The market reacted negatively to the profit warning, signalling investor concerns about the sustainability of recent gains. Volume was relatively low at 5,919 shares, indicating cautious trading amid uncertainty.

17-18 February: Continued Downtrend Amid Market Gains

The stock continued its downward trajectory on 17 and 18 February, falling 1.00% and 3.07% respectively, closing at Rs.62.48 and Rs.60.56. This contrasted with the Sensex’s steady gains of 0.32% and 0.43% on these days, highlighting the stock’s underperformance. Volume increased moderately to 6,149 and 9,332 shares, reflecting growing investor unease. The sharp 3.07% drop on 18 February was the steepest daily decline of the week, underscoring the impact of lingering concerns from the profit announcement.

19 February: Bearish Momentum Amid Sensex Decline

On 19 February, Garnet International’s stock price slipped further by 0.66% to Rs.60.16, despite a significant drop in the Sensex by 1.45%. Notably, the stock’s volume surged to 17,281 shares, suggesting increased selling pressure. The broader market weakness did not provide relief, and the stock’s decline reflected ongoing technical and fundamental challenges. This day set the stage for the critical downgrade announced the following day.

20 February: Downgrade to Strong Sell and Slight Recovery

The week concluded with a notable upgrade in trading volume to 38,661 shares and a modest price recovery of 1.65%, closing at Rs.61.15 on 20 February. However, this uptick was overshadowed by MarketsMOJO’s downgrade of Garnet International Ltd to a 'Strong Sell' rating, citing deteriorating technical indicators and weak long-term fundamentals. The downgrade reflected a shift from a previous 'Sell' rating, driven by bearish technical signals such as monthly MACD and Bollinger Bands, alongside fundamental concerns including a low average ROE of 4.73% and declining net sales at an annualised rate of -14.48%.

Weekly Price Performance vs Sensex

Key Takeaways from the Week

Negative Signals: The stock’s 3.66% weekly decline contrasted sharply with the Sensex’s 0.39% gain, highlighting relative underperformance. The downgrade to 'Strong Sell' reflects worsening technical momentum, including bearish monthly MACD and Bollinger Bands, and weak fundamental metrics such as a low ROE of 4.73% and declining net sales at -14.48% annually. Additionally, the high promoter share pledging at 46.91%, increased by 21.38% in the last quarter, adds significant risk of forced selling pressure.

Positive Aspects: Despite the overall weakness, Garnet International reported a 166.9% increase in profits over the past year, with a PAT of ₹2.92 crores in the latest six months. The stock’s valuation metrics, including a Price to Book ratio of 2.9 and a PEG ratio of 0.2, suggest some undervaluation relative to earnings growth potential. The slight price recovery on 20 February amid heavy volume indicates some short-term buying interest.

Conclusion: Elevated Risks Amid Mixed Signals

Garnet International’s week was dominated by negative developments, including a profit warning and a significant downgrade to 'Strong Sell' by MarketsMOJO. The stock’s underperformance relative to the Sensex and deteriorating technical indicators underscore heightened bearish momentum. While recent profit growth and attractive valuation metrics offer some respite, these are overshadowed by weak long-term fundamentals, declining sales, and substantial promoter share pledging. Investors should remain cautious given the elevated risks and structural challenges facing the company.

Only Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Start Today