Shares of Tejas Networks Ltd, a Tata Group company, dropped sharply by 9% on Friday, slipping below the Rs 1,000 mark to touch Rs 994.05 on the Bombay Stock Exchange (BSE). The decline followed the company’s announcement of its Q3 earnings, despite reporting a profit of Rs 165 crore, a remarkable turnaround from a loss of Rs 44.87 crore in the same period last year.
This sharp drop erased a chunk of the company’s market capitalization, which now stands at Rs 17,619 crore. While the company showed impressive growth in profits and sales, several underlying factors contributed to the stock’s decline.
What Are the Key Financial Highlights of Q3 for Tejas Networks?
Tejas Networks posted a strong set of numbers for the December 2024 quarter:
- Profit Surge: The company reported a profit of Rs 165 crore, compared to a loss of Rs 44.87 crore in Q3 of the previous year.
- Revenue Growth: Sales skyrocketed 345.98% to Rs 2,497.30 crore from Rs 559.96 crore during the December 2023 quarter.
- Inventory Build-Up: Inventory levels surged to Rs 2,683 crore by the end of Q3, up from Rs 494 crore last year and Rs 1,401 crore in the September 2024 quarter.
While these numbers are impressive, the sharp rise in inventory indicates potential inefficiencies or challenges in project execution, which may have spooked investors.
What Do the Technical Indicators Say About Tejas Networks?
From a technical analysis perspective, Tejas Networks shows signs of weakness in the short term:
- RSI: The Relative Strength Index (RSI) stands at 44.2, indicating the stock is neither overbought nor oversold.
- Moving Averages: The stock is trading below all major moving averages, including the 10-day, 20-day, 50-day, 100-day, and 200-day averages, signaling a bearish trend.
- Volatility: With a one-year beta of 1.8, Tejas Networks exhibits low volatility, making its sudden drop surprising for some investors.
How Has Tejas Networks Stock Performed Historically?
Tejas Networks has delivered strong long-term returns, even after today’s decline:
- 1-Year Performance: The stock gained 27% over the past year.
- 3-Year Performance: Tejas Networks surged 152% in the last three years.
- 52-Week Range:
- High: Rs 1,495.10 (June 27, 2024)
- Low: Rs 652.05 (March 28, 2024)
At the current level, the stock has dropped 33.13% from its 52-week high, raising questions about whether it is entering a correction phase or presenting a buying opportunity.
What Challenges Is Tejas Networks Facing?
Despite its strong financial performance, Tejas Networks faces some challenges that may have triggered the stock’s decline:
- Inventory Build-Up:
Inventory surged significantly to Rs 2,683 crore, indicating potential delays in project execution or sales realization. - Scaling Operations:
The company is investing heavily in scaling its R&D teams and operational capacity to manage large projects, which may weigh on margins in the near term. - Investor Sentiment:
The stock’s sharp decline could also reflect profit-booking by investors or concerns about its ability to sustain growth rates.
What Does Tejas Networks Do?
Tejas Networks designs and manufactures optical and data networking products for a wide range of clients, including:
- Telecommunications Service Providers
- Internet Service Providers
- Utilities and Defence
- Government Entities
The company has a global footprint, with its products sold in over 75 countries, showcasing its ability to cater to diverse markets.
Table: Key Metrics for Tejas Networks Stock
Metric | Value |
---|---|
Current Price (BSE) | Rs 994.05 |
Previous Close (BSE) | Rs 1,096.75 |
Market Cap | Rs 17,619 crore |
52-Week High | Rs 1,495.10 (June 27, 2024) |
52-Week Low | Rs 652.05 (March 28, 2024) |
1-Year Performance | +27% |
3-Year Performance | +152% |
Inventory Levels | Rs 2,683 crore (Q3 2024) |
RSI | 44.2 (Neutral Territory) |
FAQs
Why did Tejas Networks shares fall 9% after Q3 earnings?
The stock fell due to investor concerns over inventory build-up, despite strong revenue growth and a profit of Rs 165 crore in Q3.
How has Tejas Networks performed in the last year?
Tejas Networks shares have gained 27% in the past year but are down 33.13% from their 52-week high.
What is the significance of the inventory build-up?
The significant rise in inventory to Rs 2,683 crore indicates potential delays in project execution or sales realization.
Is Tejas Networks experiencing volatility?
With a beta of 1.8, Tejas Networks has low volatility, but the recent sharp drop raises concerns about short-term stability.
What does the RSI of Tejas Networks indicate?
The RSI of 44.2 suggests the stock is trading in neutral territory, neither overbought nor oversold.
Should investors be worried about the stock’s decline?
The stock’s drop could be due to profit booking or concerns over operational challenges. Long-term prospects depend on the company’s ability to manage growth efficiently.
What does Tejas Networks specialize in?
Tejas Networks designs and sells optical and data networking products to clients in telecommunications, utilities, defence, and government sectors.
Click here to know more.