Recent Price Performance and Market Context
SP Apparels has been on a downward trajectory over the past week, registering a loss of 6.19%, significantly underperforming the Sensex, which remained almost flat with a marginal decline of 0.01%. The trend extends over longer periods as well, with the stock falling 11.46% in the last month compared to the Sensex’s 1.31% decline. Year-to-date, the stock has dropped 8.71%, while the benchmark index has only fallen 1.94%. Over the past year, the divergence is even more pronounced, with SP Apparels losing 31.26% against the Sensex’s gain of 8.47%. Despite these recent setbacks, the company’s longer-term performance remains robust, having delivered a 101.59% return over three years and an impressive 292.54% over five years, far outpacing the Sensex’s respective gains of 39.07% and 70.43%.
Technical Indicators and Trading Activity
On 16-Jan, the stock traded close to its 52-week low, just 4.57% above the lowest price of ₹610.05 recorded during the period. The intraday low touched ₹631, marking a 2.33% decline from the previous close. The stock’s price currently sits below all major moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling sustained technical weakness. This bearish trend is compounded by falling investor participation, as delivery volumes on 14-Jan dropped by 11.45% compared to the five-day average, indicating reduced buying interest. Although liquidity remains adequate for moderate trade sizes, the declining volumes suggest cautious sentiment among market participants.
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Fundamental Strengths Amid Price Weakness
Despite the recent price decline, SP Apparels exhibits several fundamental strengths that support a hold rating. The company maintains a strong ability to service its debt, with a low Debt to EBITDA ratio of 1.26 times, indicating manageable leverage. Its long-term growth trajectory remains healthy, with net sales expanding at an annual rate of 21.65% and operating profit growing at 28.27%. The half-yearly results for September 2025 further reinforce this positive outlook, showcasing a return on capital employed (ROCE) of 14.54%, the highest in recent periods, alongside a debtors turnover ratio of 6.87 times and quarterly net sales reaching ₹427.34 crores.
Valuation metrics also suggest the stock is attractively priced. With a ROCE of 14 and an enterprise value to capital employed ratio of 1.6, SP Apparels trades at a discount relative to its peers’ historical valuations. Notably, while the stock has delivered a negative return of 31.26% over the past year, its profits have increased by 28.5%, resulting in a low PEG ratio of 0.5. This disparity indicates that the market may be undervaluing the company’s earnings growth potential.
Investor Composition and Market Sentiment
Institutional investors hold a significant 21.28% stake in SP Apparels, reflecting confidence from entities with the resources and expertise to analyse the company’s fundamentals thoroughly. However, the recent price weakness and reduced trading volumes suggest that retail and other market participants may be cautious, possibly awaiting clearer signals before committing further capital.
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Conclusion: Why the Stock is Falling
The decline in SP Apparels’ share price as of 16-Jan is primarily driven by technical factors and market sentiment rather than fundamental weaknesses. The stock’s underperformance relative to the Sensex and its sector, combined with trading below all key moving averages and falling investor participation, points to a cautious market stance. While the company’s financial health and growth prospects remain solid, the market appears to be pricing in near-term uncertainties or awaiting further confirmation of sustained earnings momentum. Investors should weigh the attractive valuation and strong fundamentals against the current technical downtrend and subdued trading volumes when considering their positions in SP Apparels.
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