Emami Paper Mills Receives 'Hold' Rating from MarketsMOJO, Despite Positive Financial Results

Emami Paper Mills, a microcap company in the paper and paper products industry, has recently received a 'Hold' rating from MarketsMOJO on June 11, 2024. This upgrade is based on the company's positive financial results in March 2024, with a growth of 128.7% in PBT LESS OI(Q) and 137.3% in PAT(Q). Additionally, the company's debt-equity ratio (HY) is at its lowest at 0.78 times, indicating a strong financial position.
Despite these positive factors, there are some concerns to consider. Emami Paper Mills has a high debt to EBITDA ratio of 3.90 times, which may affect its ability to service debt. Furthermore, the company has shown poor long-term growth with only a 5.12% annual growth in net sales and 2.58% in operating profit over the last 5 years. This has resulted in a low return on equity (avg) of 9.98%, indicating low profitability per unit of shareholders' funds.

From a technical standpoint, the stock is currently in a mildly bearish range, with both MACD and KST technical factors also showing a bearish trend. Additionally, institutional investors have decreased their stake in the company by -0.52% over the previous quarter, holding only 4.3% collectively. This suggests that these investors, who have better resources to analyze company fundamentals, may have a lack of confidence in Emami Paper Mills.

Moreover, the stock has consistently underperformed against the benchmark over the last 3 years, with a -4.05% return in the last year and underperformance against BSE 500 in each of the last 3 annual periods. While the company's current valuation is attractive with a ROCE of 12.8 and a 0.9 enterprise value to capital employed, these concerns may warrant a 'Hold' rating for now. Investors should closely monitor the company's performance in the coming quarters before making any investment decisions.