MarketsMOJO Downgrades TVS Supply Chain Solutions Ltd to Sell on Technical and Fundamental Concerns

Quality Assessment: Weak Long-Term Fundamentals Despite Recent Profit Growth

TVS Supply Chain Solutions operates within the Transport Services sector, a space that demands operational efficiency and robust financial health to navigate cyclical pressures. The company’s long-term fundamental strength remains weak, with an average Return on Capital Employed (ROCE) of just 4.13%, well below industry expectations. This metric indicates limited efficiency in generating returns from its capital base over recent years.

Net sales growth has been modest, with a compound annual growth rate of 6.63% over the past five years, reflecting tepid expansion in revenue streams. Furthermore, the company’s ability to service debt is concerning, with an average EBIT to interest coverage ratio of 0.89, signalling potential strain in meeting interest obligations. This is compounded by a high promoter share pledge of 31.87%, which has increased by 2.64% in the last quarter, adding downward pressure on the stock during market downturns.

Despite these challenges, TVS Supply has reported positive financial performance in recent quarters. The latest half-year results show a significant improvement in profitability, with PAT rising by 313.74% to ₹32.75 crores and a half-year ROCE peaking at 8.72%. The debt-equity ratio has also improved to 1.14 times, indicating better leverage management. However, these gains have not been sufficient to offset the broader concerns about the company’s long-term financial health.

Valuation: Attractive but Reflective of Underperformance

From a valuation standpoint, TVS Supply Chain Solutions appears attractively priced relative to its peers. The company’s ROCE of 4.3% corresponds with an enterprise value to capital employed ratio of 2, suggesting the stock is trading at a discount compared to historical averages within the sector. This valuation discount is likely a reflection of the company’s underperformance and fundamental weaknesses.

Over the past year, the stock has generated a negative return of -15.51%, significantly underperforming the BSE500 index, which delivered a 13.16% gain over the same period. This divergence highlights investor scepticism despite the company’s recent profit surge, which has seen profits grow by an extraordinary 3673% over the last year. The PEG ratio stands at zero, indicating that the market is not currently pricing in future earnings growth, possibly due to concerns over sustainability.

Financial Trend: Mixed Signals with Recent Profitability Gains

Financially, TVS Supply Chain Solutions has demonstrated a turnaround in recent quarters, with three consecutive quarters of positive results. The half-year PAT growth of 313.74% and improved ROCE to 8.72% are encouraging signs of operational recovery. The company’s debt-equity ratio at 1.14 times is the lowest in recent periods, indicating a more manageable debt load.

However, these improvements contrast with the company’s weak long-term growth trajectory and poor debt servicing capacity. The average EBIT to interest ratio below 1 suggests that earnings before interest and tax are insufficient to cover interest expenses comfortably, raising concerns about financial stability in adverse conditions. The increase in pledged promoter shares further exacerbates risk, as it may lead to forced selling if market conditions deteriorate.

Technical Analysis: Downgrade Driven by Shift to Sideways Trend

The downgrade to a Sell rating is primarily driven by a deterioration in technical indicators. The technical trend has shifted from mildly bullish to sideways, signalling a lack of clear directional momentum. Key technical metrics reveal a mixed picture:

• MACD on the weekly chart remains mildly bullish, but monthly signals are inconclusive.
• RSI on both weekly and monthly charts shows no clear signal, indicating neutral momentum.
• Bollinger Bands suggest mild bullishness weekly but mild bearishness monthly, reflecting volatility and uncertainty.
• Daily moving averages have turned mildly bearish, signalling short-term weakness.
• KST (Know Sure Thing) indicator is bearish on the weekly timeframe, reinforcing caution.
• Dow Theory remains mildly bullish on both weekly and monthly charts, offering some support to the trend.
• On-balance volume (OBV) shows no trend weekly but bullish momentum monthly, indicating mixed volume dynamics.

Price action has been weak recently, with the stock closing at ₹117.10 on 24 February 2026, down 4.30% from the previous close of ₹122.36. The 52-week high stands at ₹147.00, while the low is ₹92.40, placing the current price closer to the lower end of its annual range. The stock’s one-week return of -6.67% contrasts sharply with the Sensex’s flat 0.02% gain, underscoring recent underperformance.

Comparative Performance and Market Context

Over longer horizons, TVS Supply Chain Solutions has struggled to keep pace with broader market indices. While the Sensex has delivered a 10.60% return over the past year, the stock has declined by 15.51%. Over three and five years, the company’s returns are not available, but the Sensex’s 39.74% and 67.42% gains respectively highlight the stock’s relative underperformance. This gap reflects both sector-specific challenges and company-specific issues such as weak fundamentals and technical uncertainty.

Investment Outlook: Cautious Stance Recommended

Given the combination of weak long-term fundamentals, mixed financial trends, and a deteriorating technical picture, the downgrade to a Sell rating by MarketsMOJO is justified. The company’s current Mojo Grade of Sell reflects a cautious stance, advising investors to reconsider exposure to TVS Supply Chain Solutions Ltd until clearer signs of sustained improvement emerge.

While recent profit growth and improved leverage metrics offer some optimism, the risks posed by high promoter share pledging, poor debt servicing capacity, and sideways technical trends outweigh these positives. Investors should monitor upcoming quarterly results and technical developments closely before revisiting the stock.

In the broader context, the Transport Services sector remains competitive and sensitive to economic cycles, making stock selection critical. TVS Supply’s relative underperformance compared to the Sensex and sector peers suggests that alternative investment opportunities may offer better risk-adjusted returns at present.

Summary of Ratings and Scores

As of 23 February 2026, TVS Supply Chain Solutions Ltd holds the following key ratings:

• Mojo Score: 40.0 (Sell)
• Previous Grade: Hold
• Market Cap Grade: 3 (on a scale where higher is better)
• Technical Trend: Shifted from mildly bullish to sideways
• Financial Trend: Mixed, with recent profit growth but weak long-term fundamentals
• Quality Grade: Weak, due to low ROCE and poor debt servicing
• Valuation: Attractive relative to peers but reflective of underlying risks

Investors are advised to weigh these factors carefully and consider portfolio diversification to mitigate risks associated with this stock.

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