Why is Unjha Formulations Ltd falling/rising?

Intraday Price Movement and Volatility

On the day in question, the stock opened with a gap up of 3.75%, reaching an intraday high of ₹24.90, signalling initial optimism among investors. However, this positive momentum was short-lived as the share price plunged to an intraday low of ₹21.62, representing a decline of nearly 9.92% from the opening price. The stock traded within a wide range of ₹3.28, reflecting high volatility with an intraday volatility measure of 7.05%. Notably, the weighted average price indicated that more volume was traded closer to the lower end of the price range, suggesting selling pressure dominated the session.

Adding to the bearish sentiment, Unjha Formulations is currently trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This technical positioning often signals a downtrend and can deter short-term traders and investors from initiating new positions.

Underperformance Against Benchmarks

Over the past week, the stock has declined by 13.08%, significantly underperforming the Sensex, which fell by only 1.69% during the same period. This trend extends to longer time frames, with the stock down 11.76% over the last month and 11.72% year-to-date, compared to the Sensex’s more modest declines of 1.92% and 1.87% respectively. Over the past year, Unjha Formulations has delivered a negative return of 20.58%, while the Sensex gained 9.56%. Although the stock has shown strong gains over five years, with a 132.32% increase compared to the Sensex’s 68.97%, recent performance has been disappointing.

Investor participation has also waned, as evidenced by a 38.97% drop in delivery volume on 12 Jan compared to the five-day average, indicating reduced conviction among shareholders and possibly contributing to the stock’s downward pressure.

Fundamental Strengths and Valuation

Despite the recent price decline, Unjha Formulations reported its highest quarterly profits in September 2025, with PBDIT reaching ₹0.79 crore, PBT less other income at ₹0.76 crore, and PAT at ₹0.82 crore. The company’s return on equity stands at an attractive 32.5%, and it trades at a price-to-book value of 3.1, which is considered a discount relative to its peers’ historical valuations. Furthermore, the company’s profits have increased by 22% over the past year, and its PEG ratio of 0.4 suggests that the stock may be undervalued relative to its earnings growth potential.

Majority shareholding remains with non-institutional investors, which can sometimes lead to less stable trading patterns and increased volatility.

Weaknesses in Long-Term Fundamentals

However, the stock’s decline is largely attributable to concerns over its weak long-term fundamental strength. The company’s operating profits have grown at a modest compound annual growth rate of 14.64% over the last five years, which may not meet investor expectations for sustained growth. More critically, the company’s ability to service its debt is poor, with an average EBIT to interest coverage ratio of just 0.47, indicating potential financial stress and raising questions about its capacity to manage liabilities effectively.

Additionally, the stock has underperformed the broader BSE500 index over the last three years, one year, and three months, reinforcing the perception of below-par performance both in the near and long term. This underperformance, combined with the technical weakness and falling investor participation, has contributed to the recent sell-off.

Conclusion

In summary, Unjha Formulations Ltd’s share price decline on 13-Jan reflects a complex interplay of factors. While the company has demonstrated some positive profit growth and attractive valuation metrics, these have been overshadowed by weak long-term fundamentals, poor debt servicing ability, and consistent underperformance relative to market benchmarks. The high intraday volatility and technical weakness further exacerbate the negative sentiment, leading to reduced investor participation and a sharp price fall. Investors should weigh these factors carefully when considering exposure to this stock.

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