Mangalam Drugs and Organics Receives 'Hold' Rating After Positive Results, Attractive Valuation

Mangalam Drugs and Organics, a microcap pharmaceutical company, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company reported positive results in March 2024, with its operating profit to interest ratio reaching a high of 2.96 times and net sales at Rs 102.24 crore. Additionally, its PBDIT also reached a high of Rs 11.71 crore.
However, the technical trend for the stock is currently sideways, indicating no clear price momentum. This is a significant improvement from its previous mildly bearish trend on June 24, 2024, but has only generated a return of -0.24% since then.

From a valuation standpoint, Mangalam Drugs and Organics is currently trading at a discount compared to its historical average. Its ROCE of 1.2 and enterprise value to capital employed ratio of 1.1 make it an attractive option for investors. However, the stock has generated a negative return of -3.81% in the past year, while its profits have also fallen by -812.6%.

The majority shareholders of the company are its promoters, but it has a low ability to service debt with a high debt to EBITDA ratio of 2.77 times. Additionally, its return on equity (average) is at 8.64%, indicating low profitability per unit of shareholders' funds.

In terms of long-term growth, Mangalam Drugs and Organics has not performed well, with net sales growing at an annual rate of 10.12% and operating profit at 1.43% over the last 5 years. This below-par performance has also been reflected in its underperformance compared to BSE 500 in the last 3 years, 1 year, and 3 months.

Overall, while the recent positive results and attractive valuation make Mangalam Drugs and Organics a hold for now, its poor long-term growth and underperformance in the market may be a cause for concern for potential investors.