Unichem Laboratories Downgraded to 'Hold' by MarketsMOJO Due to Weak Fundamentals and Expensive Valuation

Unichem Laboratories, a midcap pharmaceutical company, has recently been downgraded to a 'Hold' by MarketsMOJO on November 18, 2024. This decision was based on various factors such as the company's recent financial performance and technical trends.
In the last quarter, Unichem Laboratories reported a significant growth in net profit of 229.27%, which was deemed as a very positive result. This trend has been consistent for the past four quarters, with the company also reporting the highest operating cash flow and operating profit to interest ratio. Additionally, the company's net sales have also been on the rise, reaching a high of Rs 462.16 crore.

From a technical standpoint, the stock is currently in a bullish range and has shown improvement since November 8, 2024. It has also outperformed BSE 500 in the last 3 years, 1 year, and 3 months, generating a return of 106.82%.

However, despite these positive aspects, Unichem Laboratories has weak long-term fundamental strength. Its average return on equity (ROE) is only 0.07%, and its net sales and operating profit have grown at a slow rate over the past 5 years. The company also has a poor ability to service its debt, with a low EBIT to interest ratio.

In terms of valuation, Unichem Laboratories is currently trading at a premium compared to its historical average. Its price to book value is 2.6, which is considered expensive, and its PEG ratio is 0.8, indicating that the stock may be overvalued.

It is worth noting that the majority shareholders of Unichem Laboratories are the promoters, and the company has shown market-beating performance in both the long term and near term. However, considering the weak fundamental strength and expensive valuation, MarketsMOJO has downgraded the stock to a 'Hold'. Investors are advised to carefully evaluate their options before making any investment decisions.