MarketsMOJO Upgrades TCM Ltd Rating to Sell Amid Mixed Technical and Financial Signals

Quality Assessment: Weak Fundamentals Persist

Despite the upgrade in rating, TCM Ltd’s fundamental quality remains under pressure. The company reported a negative operating performance in Q2 FY25-26, with operating losses continuing to weigh heavily on its long-term financial health. The operating cash flow for the year stands at a low ₹-10.79 crores, signalling liquidity constraints. Furthermore, the company’s ability to service debt is weak, reflected in a Debt to EBITDA ratio of -1.00 times, which is indicative of negative EBITDA and heightened financial risk.

Return on Capital Employed (ROCE) remains negative, underscoring the company’s struggle to generate adequate returns on its invested capital. The quarterly PAT fell by 36.8% to ₹-0.78 crores, while net sales declined by 14.2% to ₹5.92 crores. These figures highlight the ongoing operational challenges and weak earnings quality that continue to weigh on investor sentiment.

Valuation: Risky but Showing Signs of Market Interest

Valuation metrics for TCM Ltd remain cautious. The stock is trading at a premium relative to its historical averages, which raises concerns about its risk profile. The Price/Earnings to Growth (PEG) ratio stands at 2.8, suggesting that the stock’s price growth is outpacing earnings growth, a warning sign for value-conscious investors. However, the stock has delivered a robust 30.39% return over the past year, significantly outperforming the Sensex’s 9.06% return and the broader BSE500’s 6.41% over the same period.

This market-beating performance, despite negative earnings, may be driven by speculative interest or expectations of a turnaround, but it also implies elevated volatility and risk. The 52-week price range of ₹35.00 to ₹81.00 further illustrates the stock’s wide trading band, reflecting investor uncertainty.

Financial Trend: Negative Earnings and Cash Flow Challenges

TCM Ltd’s recent financial trend remains disappointing. The company’s quarterly PAT has declined sharply, and operating cash flows are deeply negative, signalling ongoing operational inefficiencies. The negative EBITDA and losses have resulted in a weak long-term fundamental strength rating. These factors contribute to a cautious outlook on the company’s ability to sustain growth or improve profitability in the near term.

Despite these setbacks, the company’s stock price has shown resilience, buoyed by market speculation and technical factors. However, investors should remain wary of the underlying financial fragility, which could pose risks if the company fails to reverse its losses.

Technicals: Bullish Momentum Drives Upgrade

The primary catalyst for the upgrade from Strong Sell to Sell is the marked improvement in technical indicators. The technical grade has shifted from mildly bullish to bullish, reflecting stronger momentum and positive price action. Key technical signals include:

• MACD: Both weekly and monthly MACD indicators are bullish, signalling upward momentum in the stock’s price trend.


• Bollinger Bands: Weekly bands show a bullish trend, with monthly bands mildly bullish, indicating increasing volatility with upward bias.


• Moving Averages: Daily moving averages have turned bullish, supporting the recent price gains.


• KST (Know Sure Thing): Both weekly and monthly KST indicators are bullish, reinforcing the positive momentum.

However, some mixed signals remain. The Dow Theory weekly indicator is mildly bearish, and the monthly Dow Theory shows no clear trend, suggesting some caution. RSI indicators on weekly and monthly charts show no definitive signal, indicating the stock is not yet overbought or oversold.

On 1 Jan 2026, TCM Ltd’s stock closed at ₹64.14, up 1.83% from the previous close of ₹62.99, with intraday highs touching ₹64.99 and lows at ₹59.85. This price action reflects the bullish technical sentiment despite fundamental headwinds.

Comparative Performance: Outperforming Sensex but Lagging Long-Term

Over the short and medium term, TCM Ltd has outperformed the Sensex and broader market indices. The stock returned 1.33% in the past week compared to the Sensex’s -0.22%, and a remarkable 30.39% year-to-date versus the Sensex’s 9.06%. Over three years, TCM’s return of 46.77% also surpasses the Sensex’s 40.07%.

However, over a longer horizon of 10 years, the stock has underperformed significantly, with a negative return of -28.93% compared to the Sensex’s 226.30%. This disparity highlights the company’s volatile performance and the risks associated with its business model and sector dynamics.

Sector and Shareholding Context

TCM Ltd operates within the Commodity Chemicals sector, specifically in Pesticides & Agrochemicals, a segment known for cyclical volatility and regulatory risks. The company’s promoter group remains the majority shareholder, which can be a double-edged sword—providing stability but also raising concerns about governance and minority shareholder interests.

Given the sector’s challenges and TCM’s financial struggles, investors should weigh the technical optimism against the fundamental risks carefully.

Conclusion: A Cautious Upgrade Reflecting Technical Strength Amidst Fundamental Weakness

The upgrade of TCM Ltd’s investment rating from Strong Sell to Sell is primarily driven by improved technical indicators signalling bullish momentum. However, the company’s weak financial performance, negative earnings, and risky valuation metrics temper enthusiasm. While the stock has outperformed the market in the short term, its long-term fundamentals remain fragile.

Investors considering TCM Ltd should remain vigilant, balancing the technical optimism with the underlying financial challenges. The stock’s elevated risk profile and sector volatility suggest that a cautious approach is warranted until more consistent fundamental improvements materialise.

Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Today