Why is Universal Cables falling/rising?

Market Performance and Price Movement

Universal Cables’ share price fell sharply on 17-Dec, underperforming its sector by 4.33% and touching an intraday low of ₹832.05, representing a 7.52% drop from previous levels. The weighted average price for the day indicated that a larger volume of shares traded closer to this low price, signalling selling pressure throughout the session. Notably, the stock’s price remains above its 50-day, 100-day, and 200-day moving averages, suggesting a longer-term uptrend, but it is currently trading below its 5-day and 20-day moving averages, reflecting short-term weakness.

Investor participation also declined, with delivery volumes on 16-Dec falling by 44.36% compared to the five-day average. This reduced investor engagement may have contributed to the stock’s inability to sustain higher price levels during the day. Despite this, liquidity remains adequate, allowing trades of approximately ₹0.12 crore without significant market impact.

Strong Financials Contrast with Price Drop

Despite the recent price decline, Universal Cables has demonstrated impressive financial growth. The company reported an 81.66% increase in net profit in the quarter ending September 2025, marking two consecutive quarters of positive results. Profit before tax excluding other income surged by 261.87% to ₹51.82 crore, while profit after tax rose by 160.8% to ₹47.68 crore. Additionally, the company’s operating cash flow for the year reached a record ₹175.62 crore, underscoring strong operational efficiency.

These financial metrics have translated into consistent returns for investors over the medium to long term. The stock has delivered a 16.58% return over the past year, outperforming the Sensex’s 4.80% gain during the same period. Over three and five years, the stock’s returns have been even more remarkable, at 196.10% and 498.87% respectively, far exceeding the benchmark’s 37.86% and 80.33% returns. This performance is supported by a return on capital employed (ROCE) of 7 and an attractive enterprise value to capital employed ratio of 1.4, indicating reasonable valuation levels relative to its capital base.

Moreover, the company’s price-to-earnings-to-growth (PEG) ratio stands at 0.4, suggesting that the stock is undervalued relative to its earnings growth potential. Promoters hold the majority stake, which often signals confidence in the company’s prospects from its principal shareholders.

Balancing Short-Term Weakness with Long-Term Strength

The recent decline in Universal Cables’ share price appears to be driven primarily by short-term market dynamics rather than fundamental weaknesses. The stock’s underperformance relative to the Sensex and its sector over the past week and month, with losses close to 5%, contrasts with its strong year-to-date and longer-term returns. This divergence suggests that investors may be reacting to near-term technical factors such as reduced investor participation and short-term moving average pressures.

Given the company’s solid earnings growth, attractive valuation metrics, and consistent outperformance over multiple years, the current price weakness could represent a temporary correction rather than a shift in the company’s underlying prospects. Investors may wish to monitor trading volumes and price action closely to assess whether the stock stabilises above key moving averages in the coming sessions.

In summary, Universal Cables’ share price decline on 17-Dec reflects short-term market pressures amid a backdrop of strong financial performance and attractive valuation. The stock’s long-term track record of delivering substantial returns and profit growth supports a cautious hold stance for investors seeking exposure to this mid-cap electrical cables company.

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