Recent Price Movement and Market Context
Azad Engineering’s stock has been on a positive trajectory over the past week, outperforming the Sensex with a 3.61% gain compared to the benchmark’s 0.64%. The stock has also recorded a 1.65% increase over the last month, again surpassing the Sensex’s 0.83% rise. Despite a year-to-date decline of 3.57%, which is steeper than the Sensex’s 1.11% fall, the stock has delivered an 8.22% return over the past year, closely tracking the Sensex’s 9.01% gain.
On the day in question, the stock’s performance was in line with its sector peers, reaching an intraday high of ₹1,614.70, a 3.06% increase from the previous close. Notably, the stock has been gaining for two consecutive days, accumulating a 6.76% return during this period. This momentum is supported by the stock trading above its 5-day, 20-day, and 50-day moving averages, signalling short- to medium-term strength, although it remains below its 100-day and 200-day averages, indicating some longer-term resistance.
Investor Participation and Liquidity
Investor interest appears to be intensifying, as evidenced by a 66.19% surge in delivery volume on 09 Feb, reaching 1.23 lakh shares compared to the five-day average. This heightened participation suggests growing confidence among market participants. Furthermore, the stock’s liquidity is sufficient to support trades of approximately ₹0.51 crore based on 2% of the five-day average traded value, making it accessible for both retail and institutional investors.
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Fundamental Strengths Supporting the Rise
Azad Engineering’s recent price appreciation is underpinned by solid fundamental performance. The company has reported positive results for seven consecutive quarters, with the latest quarter marking record highs in key metrics. Net sales reached ₹145.63 crore, while profit before depreciation, interest, and taxes (PBDIT) stood at ₹52.55 crore. Profit before tax excluding other income (PBT less OI) also hit a peak of ₹34.18 crore, signalling operational efficiency and strong earnings growth.
The company’s long-term growth trajectory remains healthy, with net sales expanding at an annualised rate of 32.60%. Additionally, Azad Engineering maintains a conservative capital structure, reflected in a low average debt-to-equity ratio of 0.09 times, which reduces financial risk and enhances stability.
Institutional investors hold a significant 26.07% stake in the company, indicating confidence from well-resourced market participants who typically conduct thorough fundamental analysis. Their involvement often lends credibility and can support sustained price appreciation.
Valuation Considerations and Market Sentiment
Despite these positives, the stock’s valuation metrics suggest caution. The company’s return on equity (ROE) stands at 7.5%, which is modest relative to its price-to-book (P/B) ratio of 7, indicating a relatively expensive valuation. However, the stock is trading at a discount compared to the average historical valuations of its peers, which may justify some premium.
Over the past year, while the stock has delivered an 8.22% return, the company’s profits have surged by 51%, resulting in a price/earnings to growth (PEG) ratio of 2.4. This elevated PEG ratio suggests that the stock’s price growth has not fully kept pace with earnings expansion, potentially leaving room for further upside or signalling overvaluation depending on investor expectations.
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Conclusion: Why Azad Engineering Is Rising
In summary, Azad Engineering Ltd’s recent price rise on 10-Feb is primarily driven by strong quarterly earnings, sustained sales growth, and increased investor participation. The stock’s outperformance relative to the Sensex over the past week and month reflects positive market sentiment and confidence in the company’s fundamentals. While valuation metrics indicate a premium, the discount to peer averages and robust profit growth provide a rationale for the current price momentum.
Investors should weigh these factors carefully, considering both the company’s operational strengths and valuation challenges, to make informed decisions about their exposure to Azad Engineering.
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