Trio Mercantile & Trading Ltd Upgraded to Hold on Improved Technicals and Valuation

Technical Improvements Drive Upgrade

The primary catalyst behind the upgrade is the marked improvement in the company’s technical indicators. The technical grade has shifted from mildly bullish to bullish, signalling stronger momentum in the stock price. Key technical metrics underpinning this change include a bullish Moving Average Convergence Divergence (MACD) on the weekly chart and a bullish stance on Bollinger Bands across both weekly and monthly timeframes. Daily moving averages have also turned bullish, reinforcing the positive trend.

Other technical signals present a mixed but overall positive picture. The Know Sure Thing (KST) indicator is bullish on a weekly basis, though it remains bearish monthly. The Dow Theory readings are mildly bullish on both weekly and monthly scales, while the Relative Strength Index (RSI) currently shows no significant signal. Despite some neutral or bearish monthly signals, the weekly technical momentum has been sufficient to sway the overall technical grade upward.

Price action supports this technical optimism, with the stock closing at ₹0.95 on 18 February 2026, up 1.06% from the previous close of ₹0.94. The stock has demonstrated strong short-term returns, outperforming the Sensex by a wide margin with a 1-week return of 11.76% versus the Sensex’s -0.98%, and a 1-month return of 31.94% compared to the Sensex’s -0.14%. Year-to-date, the stock has gained 37.68%, while the Sensex has declined by 2.08%.

Valuation Shifts from Expensive to Attractive

Alongside technical improvements, Trio Mercantile & Trading Ltd’s valuation grade has been upgraded from expensive to attractive. This is largely due to the stock’s current price-to-book (P/B) ratio of 0.27, which indicates the stock is trading at a significant discount to its book value. This valuation is notably lower than many of its NBFC peers, several of which are classified as very expensive or risky based on their price-earnings (PE) and enterprise value (EV) multiples.

However, some valuation metrics remain distorted. The reported PE ratio and PEG ratio are extraordinarily high—930116163956019456.00 and 9301161639560194.00 respectively—likely reflecting accounting anomalies or losses that skew these ratios. The company’s EV to EBIT and EV to EBITDA ratios are negative at -6.50, signalling operating losses. Despite these anomalies, the overall valuation grade improvement reflects the market’s recognition of the stock’s discounted price relative to its peers and book value.

Return on Capital Employed (ROCE) remains negative at -3.72%, and Return on Equity (ROE) is flat at 0.00%, underscoring ongoing profitability challenges. Dividend yield data is not available, consistent with the company’s lack of profitability.

Financial Trend Remains Weak Despite Flat Quarterly Performance

Financially, Trio Mercantile & Trading Ltd continues to face headwinds. The company reported flat financial performance in Q3 FY25-26, with no significant improvement in profitability or revenue growth. Net sales have declined at an annualised rate of -23.95%, indicating persistent contraction in core business operations.

Profit growth over the past year has been modest, with profits rising by 19%, yet this has not translated into meaningful returns for shareholders, as reflected in the stock’s 1-year return of just 2.15%, lagging the Sensex’s 9.81% gain. Over longer horizons, the stock has underperformed dramatically, with 5-year and 10-year returns of -82.59% and -76.47% respectively, compared to Sensex returns of 61.40% and 256.90% over the same periods.

The company’s operating losses and weak long-term fundamentals contribute to a cautious outlook. The PEG ratio’s extreme value further signals that earnings growth expectations are either negligible or highly uncertain.

Quality Assessment and Shareholding Structure

From a quality perspective, Trio Mercantile & Trading Ltd’s fundamentals remain weak. The company’s ROE of zero and negative ROCE highlight a lack of efficient capital utilisation. The flat quarterly results and declining sales growth point to structural challenges in the business model.

Majority shareholding is held by non-institutional investors, which may limit the influence of large, professional shareholders who could otherwise drive strategic improvements or governance reforms.

Technical Momentum and Valuation Offer Limited Upside

While the upgrade to Hold reflects improved technical momentum and a more attractive valuation, investors should remain cautious given the company’s weak financial trend and quality metrics. The stock’s recent outperformance relative to the Sensex and peers is encouraging in the short term, but the long-term fundamentals remain a concern.

Trio Mercantile & Trading Ltd’s discounted valuation may appeal to value-oriented investors willing to tolerate operational risks, but the lack of profitability and declining sales growth suggest that a turnaround is not yet evident. The technical indicators provide a positive near-term signal, but the mixed monthly technicals and weak fundamental backdrop imply that gains may be limited without a substantive improvement in business performance.

Overall, the Hold rating reflects a balanced view: the stock is no longer a sell given its improved technicals and valuation, but it does not yet warrant a Buy due to ongoing fundamental challenges.

Comparative Industry Context

Within the NBFC sector, Trio Mercantile & Trading Ltd’s valuation stands out as attractive compared to peers such as Mufin Green and Arman Financial, which are rated very expensive with PE ratios above 60 and EV/EBITDA multiples in double digits. Other peers like Satin Creditcare and SMC Global Securities also trade at higher multiples, reflecting stronger fundamentals or growth prospects.

This relative valuation discount may provide some cushion for investors, but it also reflects the market’s concerns about Trio Mercantile’s weak financial health and uncertain growth trajectory.

Conclusion

Trio Mercantile & Trading Ltd’s upgrade from Sell to Hold is primarily driven by improved technical indicators and a more attractive valuation profile. However, the company’s flat financial performance, negative returns on capital, and declining sales growth temper enthusiasm. Investors should weigh the positive technical momentum and valuation discount against the weak fundamental backdrop when considering exposure to this NBFC stock.

Given the mixed signals, a Hold rating is appropriate, signalling that the stock may offer limited upside in the near term but is not currently a sell candidate. Continued monitoring of quarterly results and operational improvements will be essential to reassess the company’s investment potential going forward.

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