Why is Super Tannery Ltd falling/rising?

Recent Price Movement and Market Comparison

Super Tannery Ltd has experienced a notable decline over multiple time frames. In the past week, the stock has fallen by 5.56%, significantly underperforming the Sensex, which declined by only 1.18% during the same period. This trend extends over the last month and year-to-date, with the stock dropping 5.43% and 6.52% respectively, while the Sensex recorded much smaller losses of around 1.1% in these intervals. Most strikingly, over the last year, Super Tannery’s share price has plummeted by 47.26%, contrasting sharply with the Sensex’s robust 7.72% gain. Even over three and five years, the stock’s returns lag behind the benchmark, highlighting persistent challenges in the company’s performance.

Technical Indicators and Trading Activity

On a technical front, the stock is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This signals a bearish trend and suggests that investor confidence remains low. The stock has also recorded four consecutive days of losses, accumulating a decline of nearly 7% in this short span. Additionally, investor participation appears to be waning, with delivery volumes on 07 January falling by 2.43% compared to the five-day average, indicating reduced buying interest. Despite this, liquidity remains adequate for trading, although the lack of strong demand is a concern for potential buyers.

Fundamental Analysis: Valuation Versus Performance

Despite the negative price action, Super Tannery Ltd presents some attractive valuation metrics. The company’s Return on Capital Employed (ROCE) stands at 8.3%, which is considered reasonable, and it trades at a discount with an enterprise value to capital employed ratio of 0.8. Furthermore, the company’s profits have increased by 23.5% over the past year, and the PEG ratio of 0.4 suggests that the stock may be undervalued relative to its earnings growth potential. The majority ownership by promoters also indicates a stable shareholding structure, which can be a positive factor for long-term investors.

However, these positives are overshadowed by significant weaknesses in the company’s fundamentals and operational performance.

Super Tannery’s long-term growth has been modest, with net sales growing at an annual rate of 11.11% and operating profit increasing by 14.65% over the last five years. More concerning is the company’s high debt burden, reflected in a Debt to EBITDA ratio of 3.39 times, which raises questions about its ability to service debt efficiently. Quarterly financials reveal further deterioration, with the latest Profit After Tax (PAT) at ₹0.69 crore falling sharply by 64.9% compared to the previous four-quarter average. Net sales for the quarter have also hit a low of ₹62.15 crore, while profit before tax excluding other income stands at a mere ₹0.53 crore, underscoring operational challenges.

Market Performance and Investor Sentiment

The stock’s underperformance is not limited to recent months but extends over several years. It has lagged behind the BSE500 index over the last three years, one year, and three months, reflecting persistent investor scepticism. The combination of weak quarterly results, high leverage, and subdued growth prospects has weighed heavily on sentiment, leading to sustained selling pressure and a declining share price.

Conclusion: Why Super Tannery Ltd is Falling

In summary, Super Tannery Ltd’s recent share price decline is primarily driven by weak financial performance, high debt levels, and poor market returns relative to benchmarks. Although the stock offers some valuation appeal and has shown profit growth, these positives are outweighed by deteriorating quarterly earnings, sluggish sales, and a lack of investor confidence as evidenced by falling volumes and technical indicators. The stock’s consistent underperformance over multiple time horizons further reinforces the cautious stance investors are taking. Until the company demonstrates stronger operational results and improved debt management, the downward pressure on its share price is likely to persist.

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