Why is Hisar Metal Industries Ltd falling/rising?

Recent Price Movement and Market Context

On 05-Jan, Hisar Metal Industries Ltd’s shares gained ₹8.20, marking a 5.07% rise, outperforming the broader Sensex index’s modest 0.26% year-to-date increase. Over the past week, the stock has appreciated by 6.25%, significantly outpacing the Sensex’s 0.88% gain. However, this short-term strength belies a more subdued one-month performance, where the stock declined by 1.73%, slightly worse than the Sensex’s 0.32% fall.

Despite the recent rally, the stock remains under pressure over longer horizons. It has delivered a negative return of 22.05% over the last year, underperforming the Sensex’s 7.85% gain. Over three years, the stock’s 19.63% return lags behind the Sensex’s 41.57%, though it has outperformed the benchmark over five years with a 95.63% gain compared to the Sensex’s 76.39%.

Trading Activity and Technical Indicators

Trading patterns reveal some volatility and caution among investors. The stock has experienced erratic trading, having not traded on two days out of the last twenty, which may reflect liquidity or interest concerns. It currently trades below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating a bearish technical trend. Nevertheless, investor participation appears to be rising, with delivery volumes on 02 Jan increasing by 26.28% compared to the five-day average, suggesting renewed interest despite the technical weakness.

Fundamental Strength and Valuation

From a fundamental perspective, Hisar Metal Industries Ltd presents a mixed picture. The company’s return on capital employed (ROCE) stands at 8.6%, which is modest but suggests some operational efficiency. Its enterprise value to capital employed ratio of 1.2 indicates the stock is trading at a discount relative to its peers’ historical valuations, potentially making it attractive to value-oriented investors.

However, the company’s profitability has deteriorated significantly. Over the past year, profits have declined by 46%, and the net profit after tax (PAT) for the first nine months stands at ₹1.65 crore, reflecting a steep contraction of 45.72%. Meanwhile, interest expenses have surged by 64.79% to ₹7.63 crore, signalling rising financial burdens. The company’s ability to service debt is weak, with a high Debt to EBITDA ratio of 3.50 times, raising concerns about financial stability.

Long-Term Performance and Risks

Hisar Metal Industries Ltd has reported negative results for 11 consecutive quarters, underscoring persistent operational challenges. Its operating profit compound annual growth rate (CAGR) over the last five years is a modest 10.77%, which is insufficient to offset the recent declines. The company’s return on capital employed for the half year is at a low 9.06%, further highlighting subdued profitability.

In terms of shareholder structure, promoters hold the majority stake, which may provide some stability. Yet, the stock’s underperformance relative to the BSE500 index over one year, three years, and three months reflects broader investor scepticism about the company’s growth prospects and financial health.

Conclusion: Why the Stock Is Rising Despite Challenges

The 5.07% rise in Hisar Metal Industries Ltd’s share price on 05-Jan appears to be driven primarily by its attractive valuation metrics and increased investor participation, rather than a turnaround in fundamentals. The stock’s discount to peers and modest ROCE provide some appeal to value investors seeking opportunities in beaten-down mid-cap stocks.

However, the company’s weak profitability, rising interest costs, and negative earnings trend over multiple quarters continue to weigh heavily on its outlook. The stock’s technical position below all major moving averages and erratic trading patterns suggest caution remains warranted. Investors should weigh the short-term price gains against the company’s longer-term financial challenges before making investment decisions.

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