Supreme Power Equipment Ltd Quality Upgrade: A Detailed Analysis of Business Fundamentals

Quality Upgrade Reflects Strong Operational Metrics

On 7 January 2026, Supreme Power Equipment Ltd’s quality grade was revised upwards from average to good, driven by robust growth and improved capital efficiency. The company’s five-year sales growth stands at an impressive 42.3%, while EBIT growth over the same period has surged by 74.2%, underscoring strong operational leverage and expanding profitability.

Return on capital employed (ROCE) averages 20.67%, and return on equity (ROE) is a healthy 19.53%, both metrics comfortably above industry averages and indicative of efficient capital utilisation. These returns suggest that Supreme Power is generating solid profits relative to its invested capital and shareholder equity, a key factor in the quality upgrade.

Additionally, the company maintains a conservative debt profile, with an average debt-to-EBITDA ratio of just 0.63 and net debt-to-equity at a low 0.10. Interest coverage remains strong at 6.15 times EBIT to interest expense, signalling ample buffer to service debt obligations. This prudent leverage supports financial stability and reduces risk in volatile market conditions.

Comparative Industry Positioning

Within the Other Electrical Equipment sector, Supreme Power now ranks among the better-quality companies, with its quality grade surpassing peers such as Yash Highvoltage and Prostarm Info, which remain at average, and Quadrant Future, rated below average. Only Kaycee Industries shares a similar good quality rating, highlighting Supreme Power’s relative strength in the sector.

Despite this, the company’s Mojo Score has declined to 41.0, resulting in a downgrade from Hold to Sell. This reflects broader concerns about valuation, market sentiment, and near-term performance risks, which have weighed on the stock price.

Share Price and Market Performance

Supreme Power’s share price has fallen sharply in recent weeks, closing at ₹164.15 on 11 February 2026, down 9.11% on the day and 13.5% year-to-date. This contrasts with the Sensex, which has gained 0.81% over the past week and 10.9% over the last year, highlighting underperformance relative to the broader market.

The stock’s 52-week high was ₹240.05, while the low was ₹100.00, indicating significant volatility. The recent price decline may reflect profit booking, sector rotation, or concerns over near-term earnings visibility despite the company’s solid fundamentals.

Consistency and Capital Efficiency

Supreme Power’s sales to capital employed ratio averages 1.26, indicating moderate asset turnover and efficient use of capital to generate revenue. The company’s tax ratio of 22.37% is in line with statutory rates, reflecting stable tax management.

Notably, the company has zero pledged shares, which reduces concerns about promoter leverage or forced selling. Institutional holding remains low at 0.20%, suggesting limited institutional interest or recent divestments, which may contribute to share price volatility.

Dividend Policy and Shareholder Returns

The dividend payout ratio is not disclosed, which may indicate a conservative approach to cash distribution or reinvestment into growth initiatives. Given the strong ROE and ROCE, investors may anticipate future dividend improvements if earnings growth sustains.

Long-Term Returns and Outlook

While the stock has delivered a 13.4% return over the past year, outperforming the Sensex’s 10.9%, longer-term data is unavailable. The sector’s growth prospects remain positive, driven by increasing demand for electrical equipment amid infrastructure expansion and industrial modernisation.

However, the recent downgrade to a Sell rating and the sharp price correction suggest caution. Investors should weigh the company’s improved quality metrics against valuation risks and market sentiment.

Balancing Quality Improvements with Market Realities

The upgrade in Supreme Power’s quality grade to good is a testament to its improved operational performance, strong returns, and prudent financial management. These factors enhance the company’s fundamental appeal and suggest a resilient business model within the Other Electrical Equipment sector.

Nevertheless, the downgrade in the overall Mojo Grade to Sell and the significant share price decline highlight that market participants remain wary. Factors such as limited institutional interest, sector cyclicality, and valuation concerns may be weighing on sentiment.

Investors should carefully analyse the company’s fundamentals alongside broader market trends and sector dynamics before making investment decisions. While the quality upgrade is encouraging, it does not fully insulate the stock from near-term volatility or downside risks.

In summary, Supreme Power Equipment Ltd presents a mixed picture: improved quality parameters and strong financial metrics contrast with market caution and price weakness. This duality underscores the importance of a nuanced approach to stock selection, balancing fundamental strength with market realities.

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