Why is LWS Knitwear Ltd falling/rising?

Recent Price Movements and Market Comparison

The stock has been on a downward trajectory over multiple time frames. In the past week, LWS Knitwear’s shares fell by 6.59%, markedly underperforming the Sensex, which declined marginally by 0.22%. The one-month performance is even more concerning, with the stock shedding 12.89% compared to the Sensex’s modest 0.49% drop. Most notably, the stock has delivered a negative return of 41.13% year-to-date and over the last twelve months, while the Sensex has gained 9.06% during the same period. This stark contrast highlights the stock’s persistent struggles amid a generally positive market environment.

Adding to the bearish sentiment, LWS Knitwear hit a new 52-week low of ₹13.50 on the day, signalling continued selling pressure. The stock also underperformed its sector by 6.51% today, further emphasising its relative weakness. Technical indicators reinforce this negative outlook, as the share price remains below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, suggesting a sustained downtrend.

Investor Participation and Liquidity Concerns

Investor engagement appears to be waning, as evidenced by a sharp 63.11% decline in delivery volume to 2,640 shares on 30 Dec compared to the five-day average. This drop in participation may indicate reduced confidence or interest among shareholders, which can exacerbate price declines. Despite this, the stock remains sufficiently liquid for trading, although the average traded value suggests limited large-scale transactions.

Fundamental Analysis: Valuation and Profitability

On the positive side, LWS Knitwear boasts a return on capital employed (ROCE) of 10.8%, which is considered attractive and suggests efficient use of capital relative to some peers. The company’s enterprise value to capital employed ratio stands at a low 0.8, indicating that the stock is trading at a discount compared to historical valuations within its sector. Furthermore, despite the steep share price decline, the company’s profits have increased by 43.6% over the past year, signalling operational improvements that have yet to be reflected in the market price.

Majority ownership remains with promoters, which can be a stabilising factor, although it does not appear to have prevented the recent sell-off.

Challenges Weighing on the Stock

However, the company’s long-term fundamentals raise concerns. The average ROCE over a longer horizon is a modest 7.21%, indicating limited sustained profitability. More critically, the firm’s debt servicing capacity is weak, with a high Debt to EBITDA ratio of 5.96 times, suggesting significant leverage and potential financial strain. This is compounded by flat financial results reported in September 2025 and a low debtors turnover ratio of 2.47 times, which may point to inefficiencies in receivables management.

These fundamental weaknesses have translated into poor market performance. The stock has underperformed the BSE500 index over the last three years, one year, and three months, reflecting investor scepticism about its growth prospects and financial health.

Conclusion: Why LWS Knitwear Is Falling

The decline in LWS Knitwear’s share price on 31-Dec is primarily attributable to its sustained underperformance relative to market benchmarks and sector peers, coupled with weak long-term fundamentals. Despite some positive signs such as profit growth and attractive valuation metrics, concerns over high leverage, flat recent results, and poor operational efficiency have dampened investor sentiment. The stock’s technical indicators and falling investor participation further reinforce the bearish outlook. Until these fundamental issues are addressed and market confidence restored, the stock is likely to remain under pressure.

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