Shivam Autotech Downgraded to 'Sell' by MarketsMOJO, High Debt and Weak Fundamentals Cited

Shivam Autotech, a microcap company in the auto ancillary industry, has recently been downgraded to a 'Sell' by MarketsMOJO on June 25, 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 has seen a negative annual growth rate of -5.87% in net sales and -7.92% in operating profit. Additionally, the company's debt to equity ratio is at a high average of 2.68 times, and it has reported losses, resulting in a negative return on equity.
Despite being a microcap company, domestic mutual funds hold only 0.06% of Shivam Autotech's shares. This could indicate that they are not comfortable with the company's current price or its business. However, there have been some positive developments for the company, such as its highest operating profit to interest ratio of 0.99 times and highest net sales of Rs 123.74 crore in the quarter ending March 2024. Its PBDIT (Profit Before Depreciation, Interest, and Taxes) also saw a high of Rs 14.94 crore in the same quarter.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and KST indicating a bullish trend. However, with a ROCE (Return on Capital Employed) of only 1.2, the stock is fairly valued with an enterprise value to capital employed ratio of 2.7. It is also trading at a discount compared to its average historical valuations.

Despite generating a return of 61.09% in the past year, which is higher than the market (BSE 500) returns of 39.00%, Shivam Autotech's profits have fallen by -44.5%. This could be a cause for concern for investors. Overall, with the recent downgrade to 'Sell' and the company's weak long-term performance, it may be wise for investors to approach Shivam Autotech with caution.