Why is Exicom Tele-Sys. falling/rising?

Persistent Downtrend and Market Underperformance

The stock has been on a consistent decline, losing 13.16% over the past week and 18.76% in the last month, significantly underperforming the Sensex, which remained nearly flat or positive during these periods. Year-to-date, Exicom Tele-Systems has plummeted by over 54%, while the Sensex has gained 8.65%. Over the last year, the stock’s return stands at a dismal -58.06%, in stark contrast to the Sensex’s 7.31% gain. This underperformance extends beyond the short term, with the company lagging behind the broader BSE500 index over multiple time frames.

Technical Indicators Reflect Weak Momentum

On 24-Nov, the stock hit a new 52-week and all-time low of ₹112.1, underscoring the severity of the sell-off. The share price has been falling for ten consecutive days, resulting in a cumulative loss of 19.45% during this period. Intraday trading showed the stock touching lows down 7.81%, with heavier volumes concentrated near these lower price levels, indicating strong selling pressure. Furthermore, Exicom Tele-Systems is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a bearish technical outlook.

Rising Investor Participation Amid Decline

Interestingly, despite the falling price, investor participation has increased, with delivery volumes on 21 Nov rising by 132.49% compared to the five-day average. This suggests that while some investors are exiting, others may be accumulating at lower levels, though the overall sentiment remains negative given the stock’s performance.

Fundamental Weaknesses Weighing on the Stock

Exicom Tele-Systems’ share price decline is deeply rooted in its weak fundamental position. The company has reported operating losses and a fragile long-term financial outlook. Operating profit growth has been modest at an annual rate of just 8.40% over the past five years, which is insufficient to inspire investor confidence. More concerning is the company’s high debt burden, reflected in a Debt to EBITDA ratio of -1.00 times, indicating a poor ability to service debt obligations.

Consistent Negative Earnings and Rising Costs

The company has declared negative results for five consecutive quarters, signalling ongoing operational challenges. Interest expenses for the nine months ended have surged by 54.50% to ₹43.77 crores, further straining profitability. Profit before tax excluding other income for the latest quarter fell by 25.7% to a loss of ₹73.01 crores, while net profit after tax declined by 33.7% to a loss of ₹66.65 crores compared to the previous four-quarter average. These figures highlight the company’s deteriorating earnings quality and mounting financial stress.

Risk Profile and Valuation Concerns

The stock is considered risky relative to its historical valuations, trading at levels that reflect heightened uncertainty. Over the past year, profits have contracted by 68%, exacerbating the negative return of 58.06% generated by the stock. This combination of falling earnings and share price depreciation has made Exicom Tele-Systems a challenging proposition for investors seeking stability or growth.

Conclusion: A Stock Under Pressure from Weak Financials and Market Sentiment

In summary, Exicom Tele-Systems Ltd’s share price decline on 24-Nov is a reflection of its ongoing operational losses, rising interest costs, and poor debt servicing capacity. The stock’s sustained underperformance relative to the Sensex and sector peers, combined with technical indicators signalling bearish momentum, has contributed to negative investor sentiment. While increased trading volumes suggest some investor interest at lower levels, the company’s weak fundamentals and consecutive quarterly losses continue to weigh heavily on its market valuation. Investors should carefully consider these factors when evaluating the stock’s prospects.

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