Samrat Pharmachem downgraded to 'Hold' by MarketsMOJO due to high valuation and profit decline

Samrat Pharmachem, a microcap pharmaceutical company, has recently been downgraded to a 'Hold' by MarketsMOJO on October 1st, 2024. This decision was based on various factors, including the company's high management efficiency with a ROCE of 26.80% and its strong ability to service debt with a low Debt to EBITDA ratio of 0.67 times.
The company has also shown healthy long-term growth, with its Net Sales growing at an annual rate of 20.12% and Operating Profit at 33.25%. In fact, in June 2024, the company declared very positive results with a growth in Operating Profit of 92.12%. This trend has continued, with the company reporting positive results for the last two consecutive quarters. In addition, its NET SALES(HY) has grown at an impressive rate of 29.09% and its PBDIT(Q) reaching a record high of Rs 2.58 cr. The OPERATING PROFIT TO NET SALES(Q) has also reached its highest at 3.19%.

Technically, the stock is currently in a Mildly Bullish range, with multiple factors such as MACD, Bollinger Band, and KST indicating a bullish trend. The majority shareholders of the company are the promoters, which adds to the confidence in the stock's performance.

Samrat Pharmachem has a track record of market-beating performance in both the long term and near term. In the last year, the stock has generated a return of 49.71%, outperforming the BSE 500. This trend has continued over the last 3 years, 1 year, and 3 months.

However, with a ROE of 5.6, the stock is currently trading at a very expensive valuation with a 2.8 Price to Book Value. It is also trading at a premium compared to its average historical valuations. Additionally, while the stock has shown strong returns in the past year, its profits have declined by -54.1%.

Overall, while Samrat Pharmachem has shown promising growth and performance, it is currently recommended to be held due to its expensive valuation and recent decline in profits. Investors should keep an eye on the company's future performance and financials before making any investment decisions.