Why is Exicom Tele-Sys. falling/rising?

Recent Price Movement and Market Context

After four consecutive days of gains, Exicom Tele-Systems experienced a trend reversal on 17-Dec, with the stock underperforming its sector by 4.65%. The intraday low touched ₹116, marking a 5.96% drop from previous levels. Notably, the weighted average price indicated that a larger volume of shares traded closer to the day’s low, signalling selling pressure. The stock also exhibited high intraday volatility of 5.21%, reflecting uncertainty among investors. While the current price remains above the 5-day and 20-day moving averages, it is still below the longer-term 50-day, 100-day, and 200-day averages, suggesting a bearish medium to long-term trend.

Long-Term Underperformance and Weak Returns

Exicom Tele-Systems has struggled to deliver positive returns over the past year and beyond. The stock has declined by 57.01% over the last 12 months, starkly contrasting with the Sensex’s 4.80% gain during the same period. Year-to-date, the stock is down 52.80%, while the Sensex has risen by 8.22%. Even in the short term, the stock’s one-month return of -10.56% underperforms the Sensex’s modest decline of 0.46%. This persistent underperformance extends to longer horizons, with the company lagging behind the BSE500 index over the last three years and three months. Such sustained negative returns have likely eroded investor confidence, contributing to the recent price fall.

Fundamental Weaknesses and Financial Struggles

The decline in Exicom Tele-Systems’ share price is underpinned by its weak fundamental profile. The company has reported operating losses and exhibits poor long-term growth, with operating profit increasing at a modest annual rate of just 8.40% over the past five years. More concerning is the company’s high debt burden, reflected in a Debt to EBITDA ratio of -1.00 times, indicating a low capacity to service debt obligations effectively. This financial strain is further evidenced by the company’s negative earnings trajectory.

Exicom Tele-Systems has posted negative results for five consecutive quarters. Interest expenses for the nine months ended have surged by 54.50% to ₹43.77 crores, exacerbating financial pressures. Profit before tax excluding other income has declined by 25.7% compared to the previous four-quarter average, standing at a loss of ₹73.01 crores. Similarly, the company’s net profit after tax has fallen by 33.7% to a loss of ₹66.65 crores in the latest quarter. These deteriorating earnings figures highlight the company’s ongoing operational challenges and contribute to the negative sentiment among investors.

Risk Profile and Valuation Concerns

The stock is considered risky relative to its historical valuations, trading with a negative EBITDA and reflecting a sharp decline in profitability. Over the past year, profits have fallen by 68%, a steeper drop than the stock’s price decline, signalling worsening operational performance. This combination of weak earnings, high debt, and poor growth prospects has likely led to the stock’s underperformance and recent price decline.

Investor Participation and Liquidity

Despite the negative price action, investor participation has increased notably. Delivery volume on 16 Dec surged by over 730% compared to the five-day average, reaching 11.48 lakh shares. This heightened activity suggests that while some investors are exiting positions, others may be repositioning or speculating on potential rebounds. The stock remains sufficiently liquid for trades up to ₹0.84 crore based on recent average traded values, allowing for active market participation despite volatility.

Conclusion: Why Exicom Tele-Systems Is Falling

The sharp decline in Exicom Tele-Systems’ share price on 17-Dec is primarily driven by its weak financial fundamentals, persistent losses, and poor long-term growth outlook. The company’s inability to generate profits, coupled with rising interest expenses and a high debt burden, has eroded investor confidence. This is reflected in the stock’s sustained underperformance relative to the Sensex and sector benchmarks. The recent trend reversal after a brief rally, high intraday volatility, and increased selling pressure near the day’s lows further underscore the negative sentiment. While increased trading volumes indicate active investor interest, the prevailing financial challenges suggest caution for current and prospective shareholders.

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