Why is Bhartiya International Ltd falling/rising?

Market Performance and Price Movement

Bhartiya International Ltd closed at ₹681.80, down ₹34.30 or 4.79% as of 08:38 PM on 09-Jan. The stock has experienced significant volatility today, with an intraday low of ₹651.75, representing an 8.99% drop from previous levels. This decline is more pronounced than the leather sector’s fall of 2.94%, indicating that the stock has underperformed its peers. The weighted average price suggests that a larger volume of shares traded near the day’s low, signalling selling pressure. Additionally, the stock is trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—highlighting a bearish technical trend.

Relative Returns and Benchmark Comparison

Over the past week, Bhartiya International’s shares have declined by 6.76%, significantly underperforming the Sensex’s 2.55% drop. The one-month performance shows an even steeper decline of 11.25%, compared to the Sensex’s modest 1.29% fall. Year-to-date, the stock is down 5.27%, while the Sensex has fallen by only 1.93%. Over the last year, the stock has posted a negative return of 18.15%, in stark contrast to the Sensex’s positive 7.67% gain. Despite this, the stock has delivered exceptional long-term returns, rising 223.13% over three years and 340.01% over five years, outperforming the benchmark substantially in the longer term.

Fundamental Strengths Amidst Price Weakness

Despite the recent price decline, Bhartiya International has demonstrated robust operational performance. The company has reported positive results for five consecutive quarters, with its operating profit to interest ratio reaching a high of 3.07 times. Cash and cash equivalents stood at ₹964.10 crores in the half-yearly report, the highest recorded, while quarterly net sales peaked at ₹399.40 crores. The company’s return on capital employed (ROCE) is 8.9%, which is considered very attractive, and it trades at a discount with an enterprise value to capital employed ratio of 1.5. Notably, profits have surged by 2849% over the past year, even as the stock price has declined, resulting in a PEG ratio of zero. Promoter confidence remains strong, with promoters increasing their stake by 1.28% in the previous quarter to hold 61.17% of the company, signalling faith in the company’s future prospects.

Challenges and Risks Weighing on the Stock

However, the stock’s underperformance can be attributed to some fundamental concerns. The company’s long-term fundamental strength is considered weak, with an average ROCE of 5.92%, which may limit its ability to generate sustainable returns. Additionally, the company faces a high debt burden, with a debt to EBITDA ratio of 6.56 times, indicating potential difficulties in servicing its debt obligations. This financial leverage could be a source of investor caution. Furthermore, the stock has underperformed the broader market significantly over the past year, with the BSE500 index generating a 6.14% return while Bhartiya International’s shares declined by 18.15%. This divergence may have contributed to the negative sentiment and selling pressure observed recently.

Investor Participation and Liquidity

Investor interest in Bhartiya International has risen sharply, with delivery volume on 08 Jan surging by over 3,100% compared to the five-day average. This heightened participation indicates active trading and possibly increased volatility. The stock remains sufficiently liquid, with the capacity to handle trade sizes of approximately ₹0.01 crore based on 2% of the five-day average traded value. Despite this, the prevailing downward momentum and sector weakness have weighed heavily on the stock price.

Conclusion

In summary, Bhartiya International Ltd’s recent share price decline as of 09-Jan is driven by a combination of factors including sector-wide weakness in leather stocks, significant underperformance relative to market benchmarks, and technical indicators signalling bearish trends. While the company’s operational results and promoter confidence remain strong, concerns over its debt levels and weaker long-term fundamental metrics have likely contributed to investor caution. The stock’s high volatility and increased trading volumes suggest that market participants are actively reassessing its valuation amid these mixed signals.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →