Ducon Infratechnologies Receives 'Hold' Rating After Positive Results, But Long-Term Fundamentals Remain Weak

Ducon Infratechnologies, a microcap trading company, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company declared positive results in December 2023, following three consecutive negative quarters. The company's PBT LESS OI(Q) has grown at an impressive rate of 220.1%, while its operating profit to interest(Q) is at its highest at 3.33 times. Additionally, its net sales(Q) have also reached a record high of Rs 112.29 crore.
Technically, the stock is currently in a Mildly Bullish range, with the technical trend improving from Sideways on 12-Apr-24. Multiple factors, such as MACD, KST, and DOW, also indicate a Mildly Bullish outlook for the stock.

With a ROCE of 7.2, Ducon Infratechnologies is currently trading at an attractive valuation with a 1.4 Enterprise value to Capital Employed. The stock is also trading at a discount compared to its average historical valuations. However, it is important to note that while the stock has generated a return of 24.48% in the past year, its profits have fallen by -16.3%.

On the other hand, the company's long-term fundamental strength is weak, with an average ROCE of 7.26%. Its net sales have only grown at an annual rate of 3.43% and operating profit at 9.89% over the last 5 years, indicating poor long-term growth. Additionally, the company has a high debt to EBITDA ratio of 4.75 times, which may affect its ability to service debt.

Moreover, there has been a decrease in promoter confidence, with promoters reducing their stake in the company by -0.58% over the previous quarter. Currently, they hold 59.66% of the company, which may signify reduced confidence in the future of the business.

In the last 1 year, Ducon Infratechnologies has underperformed the market, generating a return of 24.48%, much lower than the market (BSE 500) returns of 37.88%. While the recent positive results and technical indicators may suggest a 'Hold' rating, investors should also consider the company's weak long-term fundamentals and decreasing promoter confidence before making any investment decisions.