Why is Orissa Bengal Carrier Ltd falling/rising?

1 hour ago

Share Via

On 27-Feb, Orissa Bengal Carrier Ltd’s stock price rose by 5.44% to ₹58.00, marking a notable short-term gain despite ongoing fundamental challenges and declining profitability.

Stock Performance Outpaces Benchmark Despite Challenges

Orissa Bengal Carrier Ltd has demonstrated a strong relative performance against the broader market indices. Over the past week, the stock gained 7.41%, significantly outperforming the Sensex, which declined by 1.84%. This positive momentum extends over longer periods as well, with the stock rising 6.23% in the last month and 9.43% year-to-date, while the Sensex fell by 0.70% and 4.62% respectively. Even over five years, the stock has delivered a remarkable 125.24% return, nearly doubling the Sensex’s 65.55% gain. Such returns suggest that investors are recognising value in the stock despite its operational difficulties.

Contrasting Signals from Trading Activity and Technical Indicators

However, the day’s trading summary reveals some cautionary signs. The stock underperformed its sector by 99.03% today, indicating that sector peers fared better. Additionally, Orissa Bengal Carrier has experienced erratic trading, having not traded on three of the last twenty days. The stock is currently trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—signalling a bearish technical trend. Investor participation is also waning, with delivery volumes on 26 Feb dropping by 81.88% compared to the five-day average. Despite these factors, liquidity remains adequate for trading, suggesting that the stock is still accessible to market participants.

Valuation and Promoter Confidence Provide Support

One of the key reasons behind the stock’s rise appears to be its attractive valuation metrics. The company boasts a return on capital employed (ROCE) of 2.6%, coupled with an enterprise value to capital employed ratio of 1.2, indicating that the stock is trading at a discount relative to its peers’ historical valuations. This valuation appeal may be enticing value investors looking for opportunities in beaten-down stocks.

Moreover, promoter confidence in the company is on the rise. Promoters have increased their stake by 0.56% over the previous quarter, now holding 69.8% of the company’s shares. Such an increase is often interpreted as a positive signal, reflecting faith in the company’s future prospects despite recent setbacks.

Fundamental Weaknesses Temper Optimism

Despite the positive price action and promoter support, Orissa Bengal Carrier’s fundamentals remain weak. The company has suffered a severe decline in profitability, with profits falling by 555% over the past year. Operating profits have contracted at a staggering compound annual growth rate (CAGR) of -146.20% over the last five years, highlighting persistent operational challenges.

The company’s ability to service debt is also concerning, with a high Debt to EBITDA ratio of 6.12 times, indicating significant leverage. This financial strain is reflected in the negative return on equity (ROE) and consecutive quarterly losses. The latest quarterly profit before tax (excluding other income) stood at a loss of ₹2.12 crores, a decline of 208.16%. Interest expenses have increased by 21.61% over nine months to ₹4.22 crores, further pressuring the company’s bottom line. Net sales have also hit a low of ₹77.55 crores in the most recent quarter, underscoring the revenue challenges faced.

Conclusion: A Stock Rising on Valuation and Promoter Support Amidst Weak Financials

In summary, Orissa Bengal Carrier Ltd’s recent price rise on 27-Feb is driven primarily by its attractive valuation and increased promoter stake, signalling confidence in the company’s long-term potential. This has helped the stock outperform the Sensex and many peers despite ongoing operational losses, declining profits, and weak technical indicators. Investors should weigh the stock’s discounted valuation and promoter backing against its poor profitability, high leverage, and erratic trading patterns before making investment decisions.

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 →

{{stockdata.stock.stock_name.value}} Live

{{stockdata.stock.price.value}} {{stockdata.stock.price_difference.value}} ({{stockdata.stock.price_percentage.value}}%)

{{stockdata.stock.date.value}} | BSE+NSE Vol: {{stockdata.index_name}} Vol: {{stockdata.stock.bse_nse_vol.value}} ({{stockdata.stock.bse_nse_vol_per.value}}%)

MOJO SCORE