Understanding the Current Rating
The Strong Sell rating assigned to Surat Trade & Merchantile Ltd indicates a cautious stance for investors, signalling that the stock is expected to underperform relative to the broader market. This rating is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the company’s investment appeal and risk profile.
Quality Assessment
As of 09 February 2026, Surat Trade & Merchantile Ltd’s quality grade is categorised as below average. The company continues to face operational challenges, reflected in its weak long-term fundamental strength. Operating losses persist, and the firm’s ability to service debt remains strained, with an average EBIT to interest ratio of -2.25. This negative ratio suggests that earnings before interest and tax are insufficient to cover interest expenses, raising concerns about financial sustainability.
Return on Capital Employed (ROCE) stands at a modest 3.15%, indicating low profitability relative to the capital invested by shareholders and creditors. Additionally, the company’s Profit After Tax (PAT) for the nine months ended recently is ₹4.91 crores, which has declined by 57.53%, signalling deteriorating earnings performance. Net sales for the latest quarter have also fallen by 19.7% compared to the previous four-quarter average, underscoring weakening revenue momentum.
Valuation Perspective
The valuation grade for Surat Trade & Merchantile Ltd is currently deemed risky. The stock trades at levels that are unfavourable compared to its historical averages, reflecting heightened uncertainty among investors. Over the past year, the stock has delivered a negative return of 32.37%, while profits have contracted by 22.8%. Such declines in both market price and profitability contribute to the cautious valuation stance.
Investors should note that the company’s negative EBITDA further compounds valuation concerns, as earnings before interest, tax, depreciation, and amortisation are insufficient to cover operating costs. This situation often signals operational inefficiencies or structural issues within the business model.
Financial Trend Analysis
The financial trend for Surat Trade & Merchantile Ltd remains negative as of today. The company’s recent quarterly results show a significant contribution from non-operating income, which accounts for 300% of profit before tax. This reliance on non-core income sources may not be sustainable and could mask underlying operational weaknesses.
Stock returns over various time frames illustrate the challenging environment: a 1-day gain of 2.27% and a 1-week rise of 5.98% are overshadowed by longer-term declines, including a 3-month loss of 15.93%, a 6-month drop of 19.74%, and a year-to-date decrease of 1.20%. The one-year return stands at a steep negative 30.92%, highlighting persistent downward pressure on the stock price.
Technical Outlook
The technical grade for Surat Trade & Merchantile Ltd is bearish, reflecting a prevailing downtrend in the stock’s price movement. The recent price action, combined with negative momentum indicators, suggests limited near-term upside potential. This technical weakness aligns with the fundamental and valuation challenges faced by the company, reinforcing the overall Strong Sell recommendation.
Comparative Performance
When benchmarked against broader market indices such as the BSE500, Surat Trade & Merchantile Ltd has underperformed consistently over the last three years, one year, and three months. This underperformance further validates the cautious stance adopted by MarketsMOJO, signalling that investors may find better risk-adjusted opportunities elsewhere in the Garments & Apparels sector or the wider market.
From struggle to strength! This Small Cap from Textile - Machinery is showing early turnaround signals that look promising. Position yourself now for explosive growth potential ahead!
- - Early turnaround signals
- - Explosive growth potential
- - Textile - Machinery recovery play
What This Rating Means for Investors
For investors, the Strong Sell rating on Surat Trade & Merchantile Ltd serves as a cautionary signal. It suggests that the stock currently carries elevated risks due to weak operational performance, unfavourable valuation, deteriorating financial trends, and bearish technical indicators. Investors should carefully consider these factors before initiating or maintaining positions in the stock.
While short-term price movements have shown some positive spikes, the broader picture remains challenging. The company’s ongoing operating losses and declining sales highlight structural issues that may take time to resolve. Consequently, the stock may not be suitable for risk-averse investors or those seeking stable income and growth.
Sector and Market Context
Surat Trade & Merchantile Ltd operates within the Garments & Apparels sector, a space that has faced headwinds from changing consumer preferences, supply chain disruptions, and competitive pressures. The company’s microcap status adds an additional layer of volatility and liquidity risk, which investors should factor into their decision-making process.
Given the current market environment and the company’s financial profile, the Strong Sell rating reflects a prudent approach to risk management, encouraging investors to seek alternatives with stronger fundamentals and more favourable outlooks.
Summary
In summary, Surat Trade & Merchantile Ltd’s Strong Sell rating, last updated on 14 November 2024, remains justified based on the latest data as of 09 February 2026. The company’s below-average quality, risky valuation, negative financial trends, and bearish technicals collectively underpin this recommendation. Investors should remain cautious and monitor developments closely before considering any exposure to this stock.
Key Metrics at a Glance (As of 09 February 2026)
- Mojo Score: 3.0 (Strong Sell)
- Market Capitalisation: Microcap
- Operating EBIT to Interest Ratio (avg): -2.25
- Return on Capital Employed (avg): 3.15%
- PAT (9 months): ₹4.91 crores, down 57.53%
- Net Sales (Quarterly): ₹16.67 crores, down 19.7%
- Stock Returns: 1D +2.27%, 1W +5.98%, 1M +2.27%, 3M -15.93%, 6M -19.74%, YTD -1.20%, 1Y -30.92%
Investors seeking to navigate the Garments & Apparels sector should weigh these factors carefully and consider the broader market context before making investment decisions involving Surat Trade & Merchantile Ltd.
Unlock special upgrade rates for a limited period. Start Saving Now →
