Orient Beverages downgraded to 'Sell' by MarketsMOJO due to high debt and weak fundamentals

Orient Beverages, a microcap FMCG company, has recently been downgraded to a 'Sell' by MarketsMOJO on August 21, 2024. This decision was based on several factors, including the company's high debt and weak long-term fundamental strength. Over the past 5 years, the company's operating profit has seen a decline of -10.20% annually, and its debt to equity ratio is at a high average of 2.53 times. Additionally, the company's return on equity has been low at 6.77%, indicating low profitability per unit of shareholders' funds.
However, there are some positive aspects to consider. Orient Beverages has declared positive results for the last 3 consecutive quarters, with a higher PAT (HY) at Rs 5.05 crore and a highest operating profit to interest (Q) at 1.69 times. Its net sales (Q) have also been the highest at Rs 44.34 crore. Technically, the stock is in a mildly bullish range, with multiple factors such as MACD, KST, DOW, and OBV being bullish.

In terms of valuation, the stock has a fair ROCE of 0.7 and an enterprise value to capital employed ratio of 1.7. It is currently trading at a discount compared to its average historical valuations. However, despite generating a return of 115.91% in the past year, the company's profits have seen a significant decline of -88.3%.

The majority shareholders of Orient Beverages are its promoters, and the company has consistently generated returns over the last 3 years. In fact, it has outperformed BSE 500 in each of the last 3 annual periods. While the stock may have some positive aspects, the overall outlook for Orient Beverages is currently not favorable, leading to its downgrade to a 'Sell' by MarketsMOJO.