Why is Ramky Infra falling/rising?

Recent Price Performance and Market Context

Ramky Infrastructure's stock has underperformed significantly against the broader market benchmarks in recent weeks. Over the past week, the share price has fallen by 6.32%, while the Sensex remained almost flat with a marginal decline of 0.06%. The one-month performance shows an even sharper contrast, with Ramky Infra down 9.12% compared to the Sensex's 0.82% gain. Year-to-date, the stock is down 7.90%, whereas the Sensex has appreciated by 8.65%. Despite this short-term weakness, the stock has delivered a 9.79% return over the last year and an impressive 121.07% over three years, significantly outperforming the Sensex's 36.34% in the same period. Over five years, Ramky Infra's gains have been extraordinary at 1675.19%, dwarfing the Sensex's 90.69% rise.

However, the recent price action indicates a clear shift in investor sentiment, with the stock falling for three consecutive days, losing 6.49% in that span. Intraday trading on 24-Nov saw the stock touch a low of ₹590, reflecting selling pressure near the day's bottom. The weighted average price suggests that a larger volume of shares traded closer to this low, signalling bearish momentum.

Technical indicators reveal that while the stock remains above its 200-day moving average, it is trading below its 5-day, 20-day, 50-day, and 100-day moving averages. This pattern often indicates short- to medium-term weakness despite longer-term support levels. Additionally, investor participation appears to be waning, with delivery volumes on 21 Nov falling by 3.61% compared to the five-day average, suggesting reduced conviction among buyers.

Fundamental Challenges Weighing on the Stock

Despite an attractive valuation indicated by a return on capital employed (ROCE) of 8.3% and an enterprise value to capital employed ratio of 1.9, Ramky Infrastructure faces several fundamental headwinds. The stock trades at a discount relative to its peers' historical valuations, which might appeal to value investors. However, the company’s profitability metrics tell a more concerning story. Over the past year, profits have declined by 16%, even as the stock managed a modest 9.79% return.

Long-term growth has been moderate, with a compound annual growth rate (CAGR) of 12.67% in net sales over the last five years. More troubling is the company's weak ability to service its debt, reflected in a poor average EBIT to interest ratio of 1.50. This indicates limited cushion to cover interest expenses, raising concerns about financial stability.

Ramky Infrastructure has reported negative results for three consecutive quarters. Profit before tax excluding other income (PBT less OI) for the latest quarter stood at ₹50.39 crore, down sharply by 41.56%. Similarly, profit after tax (PAT) for the nine months ended has contracted by 28.64% to ₹144.95 crore. The half-year ROCE has also declined to a low of 15.30%, signalling deteriorating operational efficiency.

Adding to investor apprehension is the high level of promoter share pledging, with 25.7% of promoter holdings pledged as collateral. In volatile or falling markets, such high pledged shares can exert additional downward pressure on the stock price as lenders may seek to liquidate shares to cover margin calls.

Investor Takeaway

Ramky Infrastructure’s recent share price decline is primarily driven by a combination of weak quarterly earnings, subdued investor participation, and concerns over financial leverage. While the stock has demonstrated strong long-term returns and remains attractively valued compared to peers, the short-term fundamentals and debt servicing ability raise caution flags. The consecutive quarterly profit declines and high promoter share pledging amplify downside risks, especially in a falling market environment.

Investors should weigh these factors carefully against the stock’s historical outperformance and valuation discount before making investment decisions. Monitoring upcoming quarterly results and any changes in promoter pledging will be crucial to assessing the stock’s near-term trajectory.

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