Why is 7NR Retail Ltd falling/rising?

Stock Performance Against Market Benchmarks

On 01-Dec, 7NR Retail Ltd’s share price stood at ₹3.98, down by 5.01% from the previous close. This decline is consistent with the stock’s broader underperformance relative to key market indices. Over the past week, the stock has dropped 4.56%, while the Sensex gained 0.87%. The one-month trend shows a 7.23% loss for the stock against a 2.03% rise in the Sensex. Year-to-date, the stock has declined by 20.40%, contrasting sharply with the Sensex’s 9.60% gain. Over the last year, the stock has plummeted 39.14%, whereas the Sensex has appreciated by 7.32%. These figures highlight a persistent weakness in the stock’s price momentum compared to the broader market.

Technical Indicators and Trading Activity

Technically, 7NR Retail Ltd is trading below all major moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a bearish trend. The stock is also close to its 52-week low, just 4.52% above the lowest price of ₹3.80, underscoring the downward pressure on its valuation. Investor participation appears to be waning, with delivery volume on 28 Nov falling by 56.6% compared to the five-day average, indicating reduced buying interest. Although liquidity remains adequate for trading, the diminished volume suggests caution among market participants.

Fundamental Strengths and Valuation

Despite the negative price action, 7NR Retail Ltd has reported encouraging operational results. The company has posted positive earnings for the last three consecutive quarters. Net sales for the latest six months reached ₹10.33 crores, reflecting a robust growth rate of 70.74%. Profit after tax (PAT) for the same period improved to ₹0.36 crores. The company’s return on capital employed (ROCE) stands at 2, which, combined with an enterprise value to capital employed ratio of 0.8, suggests an attractive valuation relative to peers. Furthermore, the company’s profits have surged by 198.9% over the past year, even as the stock price declined by 39.14%. The low PEG ratio of 0.1 indicates that the stock may be undervalued based on earnings growth potential.

Challenges Weighing on the Stock

However, the company’s long-term fundamentals remain weak. The average return on equity (ROE) is a modest 1.81%, signalling limited profitability relative to shareholder equity. Additionally, the company’s ability to service its debt is poor, with an average EBIT to interest ratio of -0.16, raising concerns about financial stability. A significant negative factor is the reduction in promoter stake by 0.92% over the previous quarter, leaving promoters with just 10.04% ownership. This decline in promoter confidence often signals caution about the company’s future prospects and can weigh heavily on investor sentiment.

Conclusion: Why the Stock is Falling

The decline in 7NR Retail Ltd’s share price on 01-Dec is primarily driven by its sustained underperformance relative to the broader market and sector benchmarks. Despite solid sales growth and improving profits, the stock’s weak long-term fundamentals, poor debt servicing capacity, and notably reduced promoter confidence have overshadowed these positives. The technical indicators reinforce a bearish outlook, with the stock trading below all key moving averages and nearing its 52-week low. Reduced investor participation further compounds the downward pressure. Collectively, these factors explain why 7NR Retail Ltd’s stock price is falling despite some operational improvements.

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