Recent Price Movement and Market Context
On 11-Dec, Super Tannery’s shares declined by ₹0.18, or 2.65%, closing at ₹6.61. This drop is part of a broader downward trend, with the stock falling 3.92% over the past week compared to a modest 0.52% decline in the Sensex. Over the last month, the stock has also lagged the benchmark, slipping 1.34% while the Sensex gained 1.13%. Year-to-date, the stock has plummeted nearly 44%, starkly contrasting with the Sensex’s 8.55% rise. This underperformance extends over longer horizons, with a one-year return of -48.36% against the Sensex’s 4.04% gain and a three-year return of -14.04% compared to the benchmark’s robust 36.40% growth.
Super Tannery’s price is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling sustained bearish momentum. Additionally, the stock underperformed its sector by 1.86% on the day, further emphasising its relative weakness.
Investor Participation and Liquidity Concerns
Investor engagement appears to be waning, as evidenced by a sharp 63.24% drop in delivery volume on 10 Dec compared to the five-day average. This decline in trading activity suggests reduced investor interest or confidence, which can exacerbate price declines. Despite this, liquidity remains adequate for trading, although the average traded value supports only a limited trade size, indicating potential constraints for larger investors.
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Fundamental Analysis: Valuation Versus Operational Performance
Super Tannery’s valuation metrics present a mixed picture. The company boasts a return on capital employed (ROCE) of 8.3%, which is considered very attractive relative to its peers. Its enterprise value to capital employed ratio stands at a modest 0.8, indicating the stock is trading at a discount compared to historical peer valuations. Furthermore, the company’s profits have increased by 23.5% over the past year, and its price/earnings to growth (PEG) ratio is a low 0.4, suggesting undervaluation on a growth-adjusted basis.
However, these positives are overshadowed by weak long-term fundamentals. The average ROCE over recent years is only 7.13%, reflecting limited efficiency in generating returns from capital. Net sales have grown at a modest annual rate of 11.11%, while operating profit has expanded by 14.65% over the last five years—growth rates that are below expectations for a robust growth company. The company’s debt servicing capacity is also a concern, with a high debt to EBITDA ratio of 3.39 times, signalling elevated leverage and potential financial risk.
Recent Quarterly Performance Highlights
The latest quarterly results reveal further challenges. Profit after tax (PAT) has fallen sharply by 64.9% compared to the previous four-quarter average, standing at just ₹0.69 crore. Net sales for the quarter were the lowest at ₹62.15 crore, while profit before tax excluding other income also hit a low of ₹0.53 crore. These figures underscore the company’s struggle to maintain profitability and revenue momentum in the near term.
Such underwhelming quarterly performance, combined with the stock’s sustained underperformance relative to the BSE500 index over one year, three years, and three months, has contributed to the negative sentiment weighing on the share price.
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Conclusion: Why Super Tannery Is Falling
Super Tannery’s recent share price decline is primarily driven by a combination of weak operational results, poor investor participation, and underwhelming long-term growth prospects. Despite attractive valuation metrics and profit growth in the past year, the company’s inability to sustain sales and profitability in the latest quarter, coupled with high leverage and below-par returns on capital, has eroded investor confidence. The stock’s consistent underperformance against major benchmarks and sector peers further compounds the negative outlook.
Investors appear cautious, reflected in the reduced delivery volumes and the stock trading below all key moving averages. Until the company demonstrates stronger and more consistent financial performance, particularly in improving sales, profitability, and debt management, the downward pressure on its share price is likely to persist.
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