Exco Technologies Limited

Exco Technologies Limited (TSX: XTC), together with its subsidiaries, designs, develops and manufactures dies, molds, components and assemblies, and consumable equipment for the die-cast, extrusion, and automotive industries.

Why Should Investor’s Book Profit?

Declining Margin: On a sequential-quarter basis, the company’s margins are declining. In Q3FY21, its gross margin stood at 22.1% v/s 24.9% reported in Q2FY21, EBITDA margin shrunk from 17.1% in Q2FY21 to 13.2% in Q3FY21, and net margin slipped to 7.6% in Q3FY21 from 9.9% reported in Q2FY21. This reflects inflationary pressure is suppressing the margin profile of the company.

Technical Weakness: The stock is hovering in a long-term bearish zone, and the stock is trading well below its crucial short-term and long-term support levels of 50-day, 100-day, and 200-day SMAs. The price to 200-day SMA ratio stood at 0.88x, implying that the stock is trading approximately 12% below its long-term support level of 200-day SMA.

Technical Price Chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

Stock Recommendation

The resurgence of COVID-19 cases has again jolted the market sentiment, and the equity market is melting across the globe. Further, XTC’s stack has entered a solid bearish zone, and the inflationary pressure is weighing on its fundamentals. Hence, we recommend a “Sell” rating on XTC shares at the closing price of CAD 9.08 (as on December 01, 2021).

1-Year Price chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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