Why is Murudeshwar Ceramics Ltd falling/rising?

Stock Performance and Market Context

Murudeshwar Ceramics Ltd has underperformed significantly against the broader market benchmarks over multiple time horizons. In the past week, the stock declined by 6.43%, more than double the Sensex’s 2.43% fall. Over the last month, the stock’s loss widened to 7.89%, compared to the Sensex’s 4.66% drop. Year-to-date, the stock has fallen 8.31%, nearly twice the benchmark’s 4.32% decline. The disparity is even more pronounced over longer periods, with the stock delivering a negative 28.89% return in the last year while the Sensex gained 6.56%. Over three and five years, the stock’s returns of -18.78% and +46.45% lag behind the Sensex’s robust 33.80% and 66.82% gains respectively.

On the day of the decline, the stock touched an intraday low of ₹31.90, down 3.65%, with the weighted average price indicating that more volume was traded near this lower price point. This suggests selling pressure dominated trading activity. Furthermore, the stock is trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—signalling a bearish technical trend. The broader Ceramics/Marble/Granite/Sanitaryware sector also declined by 3.92%, indicating sector-wide weakness that likely weighed on investor sentiment towards Murudeshwar Ceramics.

Investor participation has notably diminished, with delivery volumes on 22 Jan falling by 74.16% compared to the five-day average. This reduced engagement may reflect waning confidence or a wait-and-watch approach amid uncertain near-term prospects. Despite this, liquidity remains adequate for trading, ensuring that the stock can be bought or sold without significant price disruption.

Fundamental Analysis: Valuation and Profitability

On the positive side, Murudeshwar Ceramics maintains a low average debt-to-equity ratio of 0.08 times, indicating limited leverage and potentially lower financial risk. The company’s return on capital employed (ROCE) stands at 3.9%, which, while modest, supports a valuation that appears attractive relative to peers. The enterprise value to capital employed ratio is 0.6, suggesting the stock is trading at a discount compared to historical averages within its sector.

Moreover, despite the stock’s negative price performance over the past year, the company’s profits have risen by 29.4%, reflecting operational improvements. The price/earnings to growth (PEG) ratio of 0.7 further indicates that the stock may be undervalued relative to its earnings growth potential. Majority ownership by promoters also provides a degree of stability in shareholding structure.

Challenges Weighing on the Stock

However, these positives are overshadowed by several critical concerns. The company’s operating profit growth has been sluggish, expanding at an annual rate of just 3.53% over the last five years. This slow growth trajectory undermines investor confidence in the company’s ability to generate sustainable earnings momentum.

Additionally, recent financial metrics reveal weaknesses. The operating cash flow for the year is at a low ₹28.69 crores, and the half-year debt-to-equity ratio has risen to 0.35 times, the highest recorded, signalling increased leverage. Quarterly profit before depreciation, interest, and taxes (PBDIT) is also at a low ₹7.00 crores, highlighting margin pressures.

The stock’s underperformance extends beyond price returns. It has lagged the BSE500 index over the last three years, one year, and three months, indicating persistent challenges in both long-term and near-term operational execution. These factors collectively contribute to the stock’s current downtrend and subdued market sentiment.

Conclusion: Why the Stock is Falling

In summary, Murudeshwar Ceramics Ltd’s share price decline on 23-Jan is primarily driven by its weak long-term growth record, recent financial underperformance, and sector-wide downturn. Although the company benefits from low leverage and attractive valuation metrics, these positives have not been sufficient to offset concerns about sluggish operating profit growth, rising debt levels, and disappointing cash flow generation. The stock’s persistent underperformance relative to major indices and peers further dampens investor enthusiasm.

Technical indicators reinforce the bearish outlook, with the stock trading below all key moving averages and experiencing lower investor participation. The broader ceramics sector’s decline adds additional headwinds, suggesting that Murudeshwar Ceramics is facing both company-specific and industry-wide challenges. Investors should weigh these factors carefully when considering exposure to this stock.

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 →