Transcorp International Ltd Upgraded to Hold on Improved Financial and Technical Metrics

Financial Performance Stabilises After Previous Weakness

One of the primary drivers behind the upgrade is the shift in Transcorp International’s financial trend from negative to flat. The company reported a flat financial performance for the quarter ended December 2025, with its financial score improving from -12 to -5 over the last three months. Key quarterly metrics reached their highest levels in recent periods: operating profit to net sales stood at 0.86%, PBDIT was ₹1.82 crores, profit before tax excluding other income was ₹1.08 crores, and PAT reached ₹1.75 crores. Earnings per share (EPS) for the quarter also peaked at ₹0.55.

However, some concerns remain. The nine-month PAT of ₹4.48 crores declined by 47.23%, indicating pressure on profitability over the longer term. Additionally, inventory turnover ratio and debtors turnover ratio for the half-year period were at their lowest levels, 326.69 times and 54.92 times respectively, signalling potential operational inefficiencies. Net sales for the quarter were also at a low ₹211.36 crores. Notably, non-operating income accounted for 53.85% of profit before tax, suggesting reliance on non-core income streams.

Valuation Becomes More Attractive Amidst Market Comparisons

Valuation metrics have also improved, with the grade shifting from fair to attractive. Transcorp International currently trades at a price-to-earnings (PE) ratio of 14.52 and a price-to-book (P/B) value of 1.31, which is reasonable compared to peers in the trading and NBFC sectors. The enterprise value to EBITDA ratio stands at 8.80, while the PEG ratio is 1.60, indicating moderate growth expectations relative to earnings. Dividend yield is 1.78%, and return on capital employed (ROCE) and return on equity (ROE) are 5.13% and 4.17% respectively, reflecting modest profitability.

When compared to industry peers such as Indiabulls and RRP Defense, which are classified as very expensive with PE ratios above 30, Transcorp’s valuation appears more attractive. This relative undervaluation supports the upgraded rating, suggesting potential upside if operational improvements materialise.

Technical Indicators Signal Bullish Momentum

The technical grade for Transcorp International has been upgraded from mildly bullish to bullish, reflecting stronger momentum in price action. Weekly MACD and Bollinger Bands indicate bullish trends, while daily moving averages also support upward movement. The KST indicator is bullish on a weekly basis, though monthly readings remain bearish, suggesting some caution over longer timeframes. Dow Theory assessments are mildly bullish on both weekly and monthly charts.

Despite a day-on-day price decline of 3.42% to ₹27.99 on 9 February 2026, the stock has shown resilience over recent periods. Year-to-date returns stand at 18.25%, outperforming the Sensex’s negative 1.92% return. Over one month, the stock gained 3.44% while the Sensex declined 1.74%. However, longer-term returns have been mixed, with a 1-year return of -3.25% versus Sensex’s 7.07%, and a 3-year return of -16.82% compared to Sensex’s 38.13%. The 5-year return is a notable 176.58%, significantly outperforming the benchmark’s 64.75%, though the 10-year return is negative at -49.20%.

Quality Assessment Remains Cautious

While the overall rating has improved, the company’s quality grade remains at Hold with a Mojo Score of 51.0, reflecting a cautious stance. The company’s long-term fundamentals show weak strength, with an average ROE of 7.92% and poor net sales growth at an annual rate of -0.34%. The flat financial results in December 2025 and underperformance against the BSE500 index over the past three years highlight ongoing challenges.

Promoters remain the majority shareholders, providing some stability in ownership. However, the company’s operational metrics such as inventory and debtor turnover ratios indicate room for improvement in working capital management.

Investment Outlook and Considerations

The upgrade to Hold reflects a balanced view of Transcorp International’s current position. The company’s improved quarterly profitability and attractive valuation metrics provide a foundation for cautious optimism. Technical indicators suggest potential for further price appreciation in the near term, supported by recent positive momentum and outperformance relative to the benchmark in the short term.

Nevertheless, investors should remain mindful of the company’s weak long-term growth trends, operational inefficiencies, and reliance on non-operating income. The stock’s underperformance over the past year and three-year period relative to the Sensex and BSE500 index underscores the need for careful monitoring of future earnings and sales growth.

At a current market price of ₹27.99, down from a previous close of ₹28.98, the stock trades below its 52-week high of ₹34.24 but above its 52-week low of ₹20.57. This price range reflects volatility and mixed investor sentiment. The company’s PEG ratio of 1.6 suggests moderate growth expectations, while the dividend yield of 1.78% offers some income potential.

Overall, the Hold rating signals that Transcorp International may be suitable for investors seeking exposure to the NBFC sector with a moderate risk appetite, but it is not yet a compelling buy given the mixed fundamental and technical signals.

Summary of Rating Changes

To summarise the key rating changes effective 6 February 2026:

• Financial Trend: Upgraded from negative to flat, driven by improved quarterly profitability and operating metrics.
• Valuation Grade: Upgraded from fair to attractive, supported by reasonable PE, P/B, and EV/EBITDA ratios relative to peers.
• Technical Grade: Upgraded from mildly bullish to bullish, with positive MACD, moving averages, and Bollinger Bands signals.
• Quality Grade: Remains at Hold with a Mojo Score of 51.0, reflecting cautious optimism amid weak long-term fundamentals.

These combined factors have led to the overall investment rating upgrade from Sell to Hold, signalling a more neutral stance on the stock’s near-term prospects.

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