Kimia Biosciences Receives 'Hold' Rating After Positive Results, High Debt Raises Concerns

Kimia Biosciences, a microcap pharmaceutical company, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company reported positive results in June 2024, with a higher PAT (HY) of Rs 3.24 crore and the highest operating profit to interest (Q) ratio of 3.34 times.
Technically, the stock is currently in a bullish range and has shown improvement from a mildly bullish trend on September 24, 2024. Multiple factors, such as MACD, Bollinger Band, and KST, indicate a bullish outlook for the stock.

The majority shareholders of Kimia Biosciences are its promoters. However, the company's high debt (debt-equity ratio of 9.59 times) weakens its long-term fundamental strength. Additionally, the company has shown poor long-term growth, with an annual growth rate of -251.46% in operating profit over the last 5 years. The debt to equity ratio (average) stands at 4.80 times, further highlighting the company's high debt.

Furthermore, Kimia Biosciences has a low profitability per unit of total capital (equity and debt), with a return on capital employed (average) of 5.80%. Its ROCE of -14.4 indicates a very expensive valuation, with an enterprise value to capital employed ratio of 5.2.

Despite the stock's strong performance in the past year, with a return of 37.28%, its profits have only risen by 90.5%. This suggests that the stock is currently trading at a premium compared to its average historical valuations.

In conclusion, while Kimia Biosciences has shown positive results and a bullish technical trend, its high debt and low profitability raise concerns about its long-term growth potential. Investors are advised to hold their positions and monitor the company's performance closely.