Bajaj Hindusthan Sugar Downgraded to 'Sell' Due to Weak Fundamentals and High Debt

Bajaj Hindusthan Sugar, a smallcap company in the sugar industry, has recently been downgraded to a 'Sell' by MarketsMOJO. This decision is based on the company's weak long-term fundamental strength, with a -34.84% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 18.74 times, indicating a low ability to service debt. This has resulted in reported losses and negative return on equity for the company.
Another concerning factor is that 100% of the promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets. In the last 1 year, the stock has underperformed the market, generating a return of only 13.60% compared to the market's 31.79% return.

On a positive note, the company reported higher profits in June 2024, with a PAT (HY) of Rs 35.18 crore and a low debt-to-equity ratio of 0.86 times. However, the technical trend for the stock is currently sideways, indicating no clear price momentum. Since the downgrade on November 4, 2024, the stock has generated -5.84% returns.

Despite the current low performance, Bajaj Hindusthan Sugar has an attractive valuation with a ROCE of 0.3 and an enterprise value to capital employed ratio of 1. This means that the stock is trading at a discount compared to its historical valuations. However, it is important to note that while the stock has generated a return of 13.60% in the last year, its profits have only risen by 58.8%. This may be a cause for concern for potential investors.