SJVN Ltd. Stock Falls to 52-Week Low of Rs.69.79 Amidst Continued Financial Strains

Stock Performance and Market Context

SJVN Ltd. recorded a day’s gain of 0.93%, marginally outperforming its sector by 0.26%, yet the stock remains well below its key moving averages, trading beneath the 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. This technical positioning underscores the prevailing bearish sentiment surrounding the stock.

In contrast, the broader market exhibited resilience, with the Sensex recovering sharply after a negative start. The benchmark index rose by 414.74 points, or 0.38%, to trade at 81,851.53. Despite this positive market momentum, SJVN Ltd. has continued to underperform, reflecting company-specific challenges.

Over the past year, SJVN Ltd. has delivered a negative return of -21.47%, significantly lagging behind the Sensex’s positive 8.61% gain. This divergence highlights the stock’s relative weakness within the power sector and the broader market.

Financial Metrics and Profitability Concerns

SJVN Ltd.’s financial indicators reveal several areas of concern that have contributed to the stock’s decline. The company’s Debt to EBITDA ratio stands at a high 6.40 times, indicating a relatively low capacity to service its debt obligations efficiently. This elevated leverage ratio is a critical factor in the company’s current valuation challenges.

Long-term growth has been modest, with net sales increasing at an annualised rate of just 4.07% over the past five years. Operating profit growth has been even more subdued, registering a mere 0.54% annual increase during the same period. These figures suggest limited expansion in core business profitability.

Return on Equity (ROE) averaged 7.94%, signalling relatively low profitability generated per unit of shareholders’ funds. Additionally, the company has reported negative results for four consecutive quarters, with Profit Before Tax excluding other income (PBT less OI) falling by 24.56% to Rs.376.01 crore in the latest quarter. Net profit after tax (PAT) declined by 30.2% to Rs.307.91 crore.

Return on Capital Employed (ROCE) for the half-year period is notably low at 4.08%, with the latest figure at 3.8%. This low ROCE, combined with an enterprise value to capital employed ratio of 1.3, points to a valuation that is expensive relative to the company’s capital efficiency.

Valuation and Relative Performance

Despite the stock’s recent decline, SJVN Ltd. is trading at a discount compared to its peers’ average historical valuations. However, this discount has not translated into positive returns, as the company’s profits have contracted by 39% over the past year. This underperformance is stark when compared with the BSE500 index, which has generated returns of 8.65% during the same period.

The stock’s 52-week high was Rs.107.50, indicating a substantial drop of approximately 35% from that peak to the current low of Rs.69.79. This wide range reflects the market’s reassessment of the company’s growth prospects and financial health.

Shareholding and Sectoral Position

The majority shareholding in SJVN Ltd. remains with the promoters, maintaining a stable ownership structure. The company operates within the power sector, which has seen mixed performance recently. While some indices such as NIFTY MEDIA and NIFTY REALTY hit new 52-week lows today, the power sector’s overall performance has been varied, with mega-cap stocks leading gains in the broader market.

Despite the sector’s partial recovery, SJVN Ltd.’s stock continues to face downward pressure, reflecting company-specific financial and valuation challenges rather than broader sectoral trends.

Summary of Key Financial and Market Indicators

- New 52-week low price: Rs.69.79

- 1-year stock return: -21.47%

- Sensex 1-year return: +8.61%

- Debt to EBITDA ratio: 6.40 times

- Net sales growth (5 years CAGR): 4.07%

- Operating profit growth (5 years CAGR): 0.54%

- Average ROE: 7.94%

- Latest PBT less other income (quarterly): Rs.376.01 crore (-24.56%)

- Latest PAT (quarterly): Rs.307.91 crore (-30.2%)

- ROCE (half-year): 4.08%

- Enterprise value to capital employed: 1.3

- Mojo Score: 21.0

- Mojo Grade: Strong Sell (upgraded from Sell on 06 Nov 2024)

- Market Cap Grade: 2

Technical and Valuation Overview

The stock’s position below all major moving averages signals sustained bearish momentum. The downgrade to a Strong Sell grade by MarketsMOJO on 06 November 2024 reflects the deteriorating financial metrics and subdued growth outlook. The Mojo Score of 21.0 further emphasises the stock’s current risk profile.

While the stock is trading at a discount relative to peers, the valuation remains expensive when considering the company’s low returns on capital and declining profitability. This combination has contributed to the stock’s fall to its 52-week low.

Conclusion

SJVN Ltd.’s stock decline to Rs.69.79, a new 52-week low, is the result of a confluence of factors including subdued sales and profit growth, high leverage, and declining returns on equity and capital employed. Despite a recovering broader market and sectoral gains, the company’s financial performance and valuation metrics have weighed heavily on investor sentiment. The stock’s technical indicators and recent grading by MarketsMOJO underline the challenges faced by the company in the current market environment.

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