Why is GE Power falling/rising?

Recent Price Movement and Market Comparison

GE Power’s share price has underperformed both its sector and broader market indices in recent sessions. Over the past week, the stock declined by 0.56%, while the Sensex gained 0.79%. This divergence is more pronounced over the year-to-date period, where GE Power has lost 7.31% compared to the Sensex’s 9.08% gain. The one-year performance further highlights this trend, with the stock down 8.05% against the Sensex’s 10.47% rise. Although the stock has delivered impressive returns over three years, rising 169.11% compared to the Sensex’s 39.39%, its recent trajectory suggests growing investor caution.

On 21-Nov, the stock touched an intraday low of ₹346.85, down 4.07%, with a weighted average price indicating that most trading volume occurred near this lower price point. Despite trading above its key moving averages—including the 5-day, 20-day, 50-day, 100-day, and 200-day averages—investor participation has waned significantly. Delivery volumes on 20 Nov dropped by 72.54% compared to the five-day average, signalling reduced buying interest and liquidity concerns despite the stock’s ability to handle trades worth approximately ₹1.12 crore based on recent volumes.

Financial Performance: Positive Quarterly Results Amid Long-Term Challenges

GE Power reported encouraging quarterly results on 25 Sep, with operating profit growing by 2.35%. The company’s profit after tax (PAT) surged to ₹44.37 crore, marking an extraordinary 563.5% increase compared to the average of the previous four quarters. Net sales for the latest six months stood at ₹567.37 crore, reflecting a robust growth rate of 22.33%. Additionally, the company’s debt-equity ratio remains impressively low at 0.05 times, indicating a conservative capital structure and limited reliance on debt financing.

Despite these positive short-term indicators, the company’s long-term fundamentals paint a less favourable picture. Over the past five years, net sales have declined at an annualised rate of 16.40%, while operating profit has contracted sharply by 188.58%. The average return on capital employed (ROCE) stands at a negligible 0%, underscoring weak efficiency in generating returns from invested capital. Furthermore, the company’s ability to service debt is questionable, with a high debt-to-EBITDA ratio of -1.00 times, signalling potential financial stress despite the low absolute debt levels.

Investor Sentiment and Institutional Participation

Investor sentiment appears cautious, as reflected in the stock’s recent underperformance relative to the broader market. While the BSE500 index has delivered an 8.59% return over the past year, GE Power’s shares have declined by 8.05%. This divergence suggests that investors are wary of the company’s prospects despite recent profit growth.

Institutional investors, who typically possess greater analytical resources, have reduced their holdings by 0.51% in the previous quarter, now collectively owning just 0.91% of the company. This decline in institutional participation may be contributing to the stock’s falling price and reduced liquidity, as these investors often provide stability and confidence to the market.

Valuation and Risk Considerations

The stock’s valuation metrics also raise concerns. Despite a 168.8% increase in profits over the past year, the share price has declined, resulting in a price-to-earnings-to-growth (PEG) ratio of 0.3. While a low PEG ratio can sometimes indicate undervaluation, in this case it may reflect market scepticism about the sustainability of profit growth given the company’s negative EBITDA and weak long-term financial health.

In summary, GE Power India Ltd’s recent share price decline is driven by a combination of factors. Although the company has delivered strong quarterly earnings growth and maintains a low debt-equity ratio, its long-term sales and profit trends remain negative. The stock’s underperformance relative to market benchmarks, coupled with falling institutional interest and concerns over debt servicing capacity, have weighed on investor confidence. These elements have contributed to the stock’s four-day losing streak and the 2.53% drop recorded on 21-Nov.

Investors should weigh the company’s short-term operational improvements against its longer-term fundamental challenges when considering exposure to GE Power’s shares.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →