Surat Trade & Merchantile Ltd is Rated Strong Sell

Understanding the Current Rating

The Strong Sell rating assigned to Surat Trade & Merchantile Ltd indicates a cautious stance for investors, signalling significant concerns across multiple evaluation parameters. This rating is based on a comprehensive assessment of the company’s quality, valuation, financial trend, and technical indicators as they stand today. It suggests that the stock is expected to underperform relative to the broader market and peers within the Garments & Apparels sector.

Quality Assessment

As of 20 February 2026, Surat Trade & Merchantile Ltd’s quality grade remains below average. The company continues to face operational challenges, reflected in its weak long-term fundamental strength. Operating losses have persisted, undermining profitability and raising questions about the sustainability of its business model. The company’s ability to service debt is notably weak, with an average EBIT to interest ratio of -3.48, indicating that earnings before interest and taxes are insufficient to cover interest expenses. Furthermore, the return on capital employed (ROCE) averages just 3.15%, signalling low efficiency in generating profits from the capital invested.

Valuation Perspective

From a valuation standpoint, the stock is considered risky. Current market pricing does not favour investors, as the company’s negative EBITDA and declining profitability have weighed heavily on its valuation multiples. Over the past year, the stock has delivered a return of -34.09%, while profits have contracted by 57.8%. This combination of falling earnings and poor returns has led to a valuation grade that warns investors of elevated risk relative to historical averages and sector benchmarks.

Financial Trend Analysis

The latest quarterly results ending December 2025 further underscore the company’s financial difficulties. Net sales for the quarter stood at ₹11.40 crores, marking a sharp decline of 39.7% compared to the previous four-quarter average. Profit after tax (PAT) also fell by 8.1% to ₹2.51 crores. Notably, non-operating income accounted for 116.72% of profit before tax, indicating that core business operations are underperforming and that profits are being supplemented by non-recurring or ancillary income sources. This negative financial trend highlights the challenges Surat Trade & Merchantile Ltd faces in stabilising its earnings and improving operational efficiency.

Technical Outlook

Technically, the stock exhibits a bearish trend. The price performance over various time frames reflects investor scepticism and selling pressure. As of 20 February 2026, the stock’s returns are as follows: a 3.45% gain on the day, but losses of 5.70% over one week, 1.44% over one month, 13.98% over three months, 28.14% over six months, 4.38% year-to-date, and a significant 32.77% decline over the past year. This pattern of sustained negative returns, particularly over medium and long-term periods, confirms the technical grade of bearishness and suggests limited near-term upside potential.

Comparative Performance

Surat Trade & Merchantile Ltd has underperformed key market indices such as the BSE500 over the last three years, one year, and three months. This underperformance relative to the broader market and sector peers further justifies the cautious rating. Investors should be mindful that the company’s microcap status and sector-specific challenges in Garments & Apparels add layers of volatility and risk to the stock’s outlook.

What This Rating Means for Investors

For investors, the Strong Sell rating on Surat Trade & Merchantile Ltd serves as a clear signal to exercise caution. The combination of weak quality metrics, risky valuation, deteriorating financial trends, and bearish technical indicators suggests that the stock is likely to face continued headwinds. Investors should carefully consider the elevated risks before initiating or maintaining positions in this microcap garment and apparel company.

While the stock’s recent daily gain of 3.45% may appear encouraging, it is important to view this in the context of broader negative trends and fundamental weaknesses. The company’s operational losses and poor debt servicing capacity highlight structural challenges that are unlikely to be resolved in the short term. Additionally, the reliance on non-operating income to bolster profits raises concerns about the sustainability of earnings.

Sector and Market Context

The Garments & Apparels sector has faced mixed conditions, with some companies benefiting from export demand and others struggling with input cost pressures and competitive dynamics. Surat Trade & Merchantile Ltd’s microcap status and below-average fundamentals place it at a disadvantage compared to larger, more financially robust peers. Investors seeking exposure to this sector may prefer companies with stronger financial health and more favourable valuations.

Summary

In summary, Surat Trade & Merchantile Ltd’s current Strong Sell rating by MarketsMOJO, last updated on 14 November 2024, reflects a comprehensive evaluation of its present-day fundamentals as of 20 February 2026. The company’s below-average quality, risky valuation, negative financial trends, and bearish technical outlook collectively justify this cautious stance. Investors should weigh these factors carefully and consider alternative opportunities with stronger financial profiles and growth prospects.

Key Metrics at a Glance (As of 20 February 2026):

• Mojo Score: 3.0 (Strong Sell)
• Market Capitalisation: Microcap
• Operating EBIT to Interest Ratio (avg): -3.48
• Return on Capital Employed (avg): 3.15%
• Net Sales (Q4 Dec 2025): ₹11.40 crores (-39.7% vs previous 4Q average)
• Profit After Tax (Q4 Dec 2025): ₹2.51 crores (-8.1% vs previous 4Q average)
• Non-operating Income as % of PBT: 116.72%
• Stock Returns: 1D +3.45%, 1W -5.70%, 1M -1.44%, 3M -13.98%, 6M -28.14%, YTD -4.38%, 1Y -32.77%

Investors should monitor the company’s quarterly updates and sector developments closely to reassess the outlook as new data emerges.

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