Sakthi Sugars Receives 'Hold' Rating from MarketsMOJO After Positive Results and Growth in PAT(Q)

Sakthi Sugars, a microcap company in the sugar industry, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company's positive results in June 2024, with a significant growth in PAT(Q) at Rs 28.31 crore, a 333.9% increase. Additionally, the company's operating profit to interest(Q) ratio has reached its highest at 2.41 times, while its net sales(Q) have also seen a significant increase at Rs 393.59 crore.
From a technical standpoint, the stock is currently in a mildly bullish range, with the trend improving from sideways on 06-Nov-24. The Bollinger Band, a key technical factor, has also been bullish since 06 Nov 2024. Furthermore, with a ROCE of 4.1, the stock is currently trading at an attractive valuation with a 1.3 enterprise value to capital employed. It is also trading at a discount compared to its average historical valuations.

However, the company does have some weak long-term fundamental strengths, with a high debt-equity ratio of 6.5 times and a low ability to service debt with a debt to EBITDA ratio of 13.90 times. This has resulted in reported losses and a negative ROE. Additionally, 76.79% of promoter shares are pledged, which can put downward pressure on the stock prices in falling markets. The proportion of pledged holdings has also increased by 6.02% over the last quarter.

In the last year, Sakthi Sugars has underperformed the market, with a return of only 8.55% compared to the market's (BSE 500) return of 33.50%. While the company has shown positive growth in its recent results, its high debt and pledged shares may be a cause for concern for investors. MarketsMOJO's 'Hold' rating suggests a cautious approach towards this microcap company in the sugar industry.