Z F Steering Gear (India) Stock Hits 52-Week Low at Rs.790

Recent Price Movement and Market Context

The stock of Z F Steering Gear (India) recorded a fresh 52-week low today at Rs.790, continuing a losing streak over the last three sessions with a cumulative return of -4.13% during this period. This decline comes despite the stock’s performance today aligning with the broader sector trend. The company’s share price currently trades below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, indicating sustained downward momentum.

In comparison, the Sensex opened flat but has since moved into negative territory, trading at 85,470.00 points, down 0.28% or 87.53 points. The benchmark index remains close to its 52-week high of 86,159.02, just 0.81% away, and is supported by bullish moving averages with the 50-day average above the 200-day average. This contrast highlights the underperformance of Z F Steering Gear (India) relative to the broader market.

One-Year Performance and Relative Positioning

Over the past year, Z F Steering Gear (India) has experienced a substantial decline of approximately 48.37%, a stark contrast to the Sensex’s positive return of 4.60% over the same period. The stock’s 52-week high was Rs.1,635, underscoring the extent of the price erosion. This underperformance extends to the BSE500 index, which has generated a modest 1.44% return in the last year, while the stock has delivered negative returns of 48.04%.

Financial Metrics Reflecting Company Performance

The company’s financial indicators reveal several areas of concern. The Return on Capital Employed (ROCE) stands at 3.76%, signalling limited profitability relative to the capital invested. This figure is notably low for the auto components sector, where efficient capital utilisation is critical.

Operating profit has shown a negative compound annual growth rate of 28.65% over the last five years, indicating a contraction in core earnings. Furthermore, the company has reported negative results for five consecutive quarters, with the latest quarterly Profit Before Tax (excluding other income) at Rs. -0.85 crore, reflecting a decline of 211.5% compared to the previous four-quarter average. The net profit after tax for the quarter was Rs. -0.39 crore, down 112.3% relative to the prior four-quarter average.

Debt and Valuation Considerations

Despite the challenges in profitability, Z F Steering Gear (India) maintains a relatively low Debt to EBITDA ratio of 1.27 times, suggesting a manageable debt servicing capacity. The company’s Enterprise Value to Capital Employed ratio stands at 1.4, which is considered fair and indicates that the stock is trading at a discount compared to its peers’ historical valuations.

However, the company’s interest expenses for the nine months period have risen by 52.68% to Rs. 6.26 crore, which may exert additional pressure on earnings. The combination of rising interest costs and declining profitability has contributed to the subdued market sentiment surrounding the stock.

Market Participation and Shareholding Patterns

Domestic mutual funds currently hold no stake in Z F Steering Gear (India), a notable point given their capacity for detailed company analysis and research. This absence of institutional holding may reflect a cautious stance towards the stock’s valuation and business outlook.

The company’s size and market capitalisation grade of 4 indicate a mid-tier presence within the auto components sector, yet its stock performance and financial metrics have not aligned with broader market gains or sectoral trends.

Sector and Industry Context

Z F Steering Gear (India) operates within the Auto Components & Equipments sector, which has experienced mixed performance amid evolving market conditions. While the broader sector has shown resilience, the company’s stock has not mirrored this trend, reflecting company-specific factors impacting its valuation and market perception.

The stock’s current trading below all major moving averages contrasts with the Sensex’s position above its 50-day and 200-day moving averages, underscoring the divergence between the company’s share price trajectory and the overall market momentum.

Profitability and Growth Trends

Profitability metrics highlight the company’s subdued earnings profile. The average Return on Capital Employed of 3.76% is low relative to industry standards, indicating limited efficiency in generating returns from invested capital. Operating profit has contracted at an annual rate of 28.65% over the past five years, signalling challenges in sustaining growth.

Quarterly financials reveal a continuing trend of losses, with the latest quarter’s Profit Before Tax (excluding other income) at Rs. -0.85 crore and net loss after tax at Rs. -0.39 crore. These figures represent significant declines compared to the previous four-quarter averages, reflecting ongoing pressures on the company’s earnings.

Stock Valuation and Market Sentiment

The stock’s valuation metrics suggest it is trading at a discount relative to its historical peer group, with an Enterprise Value to Capital Employed ratio of 1.4 and a ROCE of 1.7 in recent assessments. Despite this, the stock’s price has declined by nearly half over the past year, with profits falling by 66.3% during the same period.

This combination of valuation and financial performance has contributed to the stock’s current position at its 52-week low, reflecting a cautious market stance.

Summary of Key Financial Indicators

To summarise, Z F Steering Gear (India) exhibits the following key financial characteristics:

• 52-week low price of Rs.790, down from a high of Rs.1,635


• One-year stock return of approximately -48.37%


• Return on Capital Employed averaging 3.76%


• Operating profit contracting at an annual rate of 28.65% over five years


• Five consecutive quarters of negative results


• Interest expenses rising by 52.68% to Rs. 6.26 crore over nine months


• Debt to EBITDA ratio of 1.27 times


• Enterprise Value to Capital Employed ratio of 1.4

These factors collectively illustrate the challenges faced by the company in recent periods and provide context for the stock’s current valuation and price levels.

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