Why is Shekhawati Inds falling/rising?

Intraday Performance and Market Context

Shekhawati Industries Ltd’s stock opened with a gap up of 6.22% and reached an intraday high of ₹20.70, reflecting strong buying interest despite a backdrop of weak long-term fundamentals. The stock’s performance today notably outpaced the broader sector, signalling a short-term positive momentum. It also surpassed its 5-day and 20-day moving averages, although it remains below the 50-day, 100-day, and 200-day averages, indicating that while recent trading sentiment is bullish, the longer-term trend remains subdued.

Over the past week, the stock has gained 3.40%, outperforming the Sensex’s 0.87% rise, but it has remained flat over the last month compared to the Sensex’s 2.03% gain. Year-to-date, the stock has declined by 31.52%, contrasting sharply with the Sensex’s 9.60% increase. Over the last year, the stock has underperformed significantly, falling 39.91% against the Sensex’s 7.32% rise. However, the stock’s long-term returns over three and five years have been extraordinary, with gains exceeding 3,700% and 4,400% respectively, dwarfing the Sensex’s corresponding returns.

Fundamental Analysis: Strengths and Weaknesses

Despite the recent price surge, Shekhawati Industries faces considerable fundamental challenges. The company has reported negative results for four consecutive quarters, with net sales in the latest six months declining sharply by 82.55% to ₹6.00 crores. Profit after tax (PAT) for the nine months stands at ₹4.52 crores, down 64.87% year-on-year. This weak operational performance is reflected in the company’s low inventory turnover ratio of 0.21 times, indicating sluggish movement of stock.

Long-term growth prospects appear bleak, with a compound annual growth rate (CAGR) in net sales of -17.38% over the past five years. The company also struggles with debt servicing, evidenced by a high Debt to EBITDA ratio of -1.00 times, signalling financial stress. These factors have contributed to the stock’s underperformance relative to the broader market, with a 39.91% decline over the last year compared to a 5.03% gain in the BSE500 index.

On the positive side, Shekhawati Industries boasts a return on equity (ROE) of 33.7%, which is considered very attractive, and it trades at a price-to-book value of 4, suggesting it is undervalued relative to its peers’ historical valuations. The majority shareholding by promoters may also provide some stability in governance and strategic direction.

Investor Sentiment and Trading Activity

Investor participation appears to be waning, with delivery volume on 28 November falling by nearly 65% compared to the five-day average. This decline in investor engagement suggests that the recent price rise may be driven by short-term traders or speculative interest rather than sustained institutional buying. Liquidity remains adequate for trading, but the stock’s position below longer-term moving averages indicates caution among investors regarding its medium-term prospects.

In summary, the nearly 10% rise in Shekhawati Industries’ share price on 01 December reflects a short-term rebound following a brief decline, supported by attractive valuation metrics and a strong ROE. However, the company’s weak sales growth, deteriorating profits, and financial stress continue to weigh heavily on its fundamentals. Investors should weigh these mixed signals carefully, considering the stock’s historical volatility and underperformance against broader market indices.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →