Alicon Castalloy Upgraded to 'Hold' Rating After Strong Financial Performance

Alicon Castalloy, a smallcap company in the auto ancillary industry, has recently been upgraded to a 'Hold' rating by MarketsMOJO. This upgrade comes after the company has declared positive results for the last four consecutive quarters. Its operating cash flow has been the highest at Rs 157.36 crore, while its profit after tax has grown by 49.38% to Rs 35.85 crore. Additionally, its return on capital employed has also been the highest at 14.85%.
Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, and OBV indicating a bullish trend. With a ROCE of 14.5, the stock is also attractively valued with a 2.4 enterprise value to capital employed ratio. Furthermore, the stock is currently trading at a discount compared to its average historical valuations.

In the past year, the stock has outperformed the market (BSE 500) with a return of 39.03%, while its profits have also seen a significant increase of 48.3%. This has resulted in a low PEG ratio of 0.6 for the company.

However, there are some concerns regarding the company's ability to service its debt, as it has a high debt to EBITDA ratio of 2.58 times. Additionally, the company has also shown poor long-term growth, with net sales growing at an annual rate of 9.12% and operating profit at 1.68% over the last five years. This has resulted in a low return on equity of 6.47%, indicating low profitability per unit of shareholders' funds.

Moreover, there has been a decrease in promoter confidence as they have reduced their stake in the company by -1.02% over the previous quarter and currently hold 54.18% of the company. This decrease in stake may signify reduced confidence in the future of the business.

In conclusion, while Alicon Castalloy has shown positive results in the past year, there are some concerns regarding its debt and long-term growth. Investors may want to hold onto their current positions and monitor the company's performance closely before making any further investment decisions.