Surat Trade & Merchantile Ltd is Rated Strong Sell

Current Rating and Its Significance

MarketsMOJO’s Strong Sell rating for Surat Trade & Merchantile Ltd indicates a cautious stance for investors, signalling significant concerns about the company’s financial health and market prospects. This rating suggests that the stock is expected to underperform relative to the broader market and peers in the Garments & Apparels sector. Investors should carefully consider the risks before committing capital, as the company currently exhibits multiple challenges across quality, valuation, financial trends, and technical indicators.

Here’s How the Stock Looks Today

As of 25 December 2025, Surat Trade & Merchantile Ltd remains a microcap player in the Garments & Apparels sector, with a Mojo Score of 3.0, reflecting a marked deterioration from its previous score of 37. The downgrade to Strong Sell on 14 Nov 2024 was driven by a 34-point drop in the Mojo Score, underscoring the company’s weakening fundamentals and market position.

Quality Assessment

The company’s quality grade is below average, highlighting persistent operational and profitability issues. Currently, Surat Trade & Merchantile Ltd is grappling with operating losses that have eroded its long-term fundamental strength. The latest quarterly data shows a PAT of just ₹0.27 crore, which has plunged by 92.7% compared to the previous four-quarter average. Net sales have also declined by 19.7% over the same period, signalling weakening demand or operational inefficiencies.

Moreover, the company’s ability to service debt is notably weak, with an average EBIT to interest ratio of -2.25, indicating that earnings before interest and tax are insufficient to cover interest expenses. Return on Capital Employed (ROCE) stands at a modest 3.15%, reflecting low profitability relative to the capital invested. These factors collectively point to a fragile quality profile that undermines investor confidence.

Valuation Perspective

From a valuation standpoint, the stock is considered risky. The company’s negative EBITDA and declining profitability have led to valuations that are unfavourable compared to its historical averages. Over the past year, Surat Trade & Merchantile Ltd has delivered a total return of -34.37%, with profits falling by 22.8%. This combination of poor earnings performance and negative returns has contributed to the stock’s unattractive valuation metrics, deterring value-focused investors.

Financial Trend Analysis

The financial trend for Surat Trade & Merchantile Ltd is negative, reflecting deteriorating earnings and sales momentum. The company’s quarterly net sales of ₹16.67 crore have fallen by nearly 20% compared to the previous four-quarter average, while non-operating income now constitutes 300% of profit before tax, indicating reliance on non-core activities to sustain profitability. This raises concerns about the sustainability of earnings and the core business’s health.

Additionally, the stock has consistently underperformed the BSE500 benchmark over the last three years, with annual returns lagging each year. The one-year return of -34.37% starkly contrasts with broader market gains, signalling persistent challenges in regaining investor favour or operational turnaround.

Technical Outlook

Technically, the stock is graded bearish, reflecting negative momentum and weak price action. Recent price movements show a 1-day gain of 1.73% and a 1-week gain of 1.93%, but these short-term upticks are overshadowed by longer-term declines of 16.56% over three months and 20.45% over six months. The prevailing technical indicators suggest limited buying interest and a cautious market sentiment, reinforcing the Strong Sell rating.

Implications for Investors

For investors, the Strong Sell rating on Surat Trade & Merchantile Ltd signals a high-risk profile with limited upside potential. The combination of weak quality metrics, risky valuation, negative financial trends, and bearish technicals suggests that the stock may continue to face headwinds. Investors seeking capital preservation or growth should consider alternative opportunities with stronger fundamentals and more favourable market dynamics.

Summary

In summary, Surat Trade & Merchantile Ltd’s current Strong Sell rating by MarketsMOJO reflects a comprehensive assessment of its below-average quality, risky valuation, negative financial trends, and bearish technical outlook. Despite some short-term price gains, the company’s fundamental challenges and consistent underperformance relative to benchmarks caution investors against exposure at this time. The rating, last updated on 14 Nov 2024, remains relevant as of 25 December 2025, based on the latest available data and market conditions.

Investor Takeaway

Investors should approach Surat Trade & Merchantile Ltd with caution, recognising the elevated risks and limited growth prospects. The Strong Sell rating serves as a clear signal to prioritise capital preservation and consider more robust investment alternatives within the Garments & Apparels sector or broader market. Continuous monitoring of the company’s financial health and market developments is advisable for those holding or considering this stock.

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