Trio Mercantile & Trading Ltd Upgraded to Sell on Technical Improvements Despite Weak Fundamentals

Quality Assessment: Weak Fundamentals Persist

Despite the recent upgrade in rating, Trio Mercantile & Trading Ltd’s fundamental quality remains under pressure. The company reported flat financial performance in the second quarter of fiscal year 2025-26, with operating losses continuing to weigh heavily on its long-term viability. Net sales have declined at an annualised rate of -25.62%, signalling deteriorating revenue streams. Furthermore, the company’s EBITDA remains negative, underscoring ongoing operational challenges.

These factors contribute to a weak long-term fundamental strength grade, which has not improved sufficiently to warrant a more positive outlook. The company’s profitability has contracted by 32% over the past year, while its stock price has declined by 37.82% during the same period, highlighting the disconnect between market performance and underlying business health.

Valuation: Risky and Elevated Relative to Historical Norms

Trio Mercantile & Trading Ltd’s valuation remains a concern for investors. The stock is trading at a price of ₹0.74, up from the previous close of ₹0.71, but still significantly below its 52-week high of ₹1.32. The current market capitalisation grade stands at 4, reflecting a mid-tier valuation status within its sector. However, the stock’s historical valuation multiples suggest it is trading at a risky premium relative to its average levels, which may deter value-focused investors.

Comparatively, the company’s returns lag far behind the benchmark Sensex, which has delivered a 7.28% gain over the past year, while Trio Mercantile’s stock has lost nearly 38%. Over longer horizons, the disparity is even more pronounced, with the stock down 85.96% over five years versus the Sensex’s 79.16% gain, emphasising the valuation risk embedded in the share price.

Financial Trend: Flat to Negative Performance Continues

The financial trend for Trio Mercantile & Trading Ltd remains subdued. The company’s quarterly results for Q2 FY25-26 showed no significant improvement, with flat revenue and persistent operating losses. This stagnation is a red flag for investors seeking growth or turnaround stories in the NBFC sector.

Long-term growth prospects appear bleak, with net sales shrinking annually by over 25%. The negative EBITDA further compounds concerns about the company’s ability to generate sustainable cash flows. These financial trends underpin the cautious stance reflected in the current Sell rating, despite technical improvements.

Technical Analysis: Mildly Bullish Signals Drive Upgrade

The primary catalyst for the upgrade from Strong Sell to Sell is the shift in technical indicators, which have moved from a sideways to a mildly bullish trend. Key technical metrics reveal a nuanced picture:

• MACD: Both weekly and monthly charts show mildly bullish momentum, suggesting a potential positive shift in price action.


• RSI: Currently neutral on both weekly and monthly timeframes, indicating no overbought or oversold conditions.


• Bollinger Bands: Weekly readings are bullish, while monthly bands remain mildly bearish, reflecting short-term optimism tempered by longer-term caution.


• Moving Averages: Daily averages have turned mildly bullish, supporting the recent price uptick from ₹0.71 to ₹0.74.


• KST (Know Sure Thing): Weekly momentum is bullish, though monthly momentum remains bearish, highlighting mixed signals across timeframes.


• Dow Theory: Weekly trend is mildly bullish, but no clear trend is established monthly.

These technical improvements have encouraged a more positive near-term outlook, justifying the upgrade in rating despite the company’s fundamental weaknesses.

Price and Return Analysis: Mixed Performance Against Benchmarks

Trio Mercantile & Trading Ltd’s stock price has shown some resilience recently, with a 4.23% gain on the day of the rating change and a year-to-date return of 7.25%, outperforming the Sensex’s 0.64% YTD gain. However, over longer periods, the stock has underperformed significantly. The one-year return stands at -37.82%, compared to the Sensex’s 7.28% gain, while the three-year and five-year returns are down by 33.93% and 85.96% respectively, against Sensex gains of 40.21% and 79.16%.

This disparity highlights the stock’s volatility and the challenges it faces in regaining investor confidence over the long term.

Shareholding and Market Position

Trio Mercantile & Trading Ltd’s shareholding pattern is dominated by non-institutional investors, which may contribute to higher volatility and less stable support during market fluctuations. The company operates within the NBFC sector, which has faced regulatory and economic headwinds in recent years, adding to the challenges in restoring investor confidence.

Its current Mojo Score stands at 33.0, with a Mojo Grade of Sell, reflecting the combined assessment of quality, valuation, financial trend, and technical parameters by MarketsMOJO’s proprietary scoring system. This score represents an improvement from the previous Strong Sell grade, primarily driven by technical factors rather than fundamental recovery.

Conclusion: Cautious Optimism Amidst Lingering Risks

While the upgrade from Strong Sell to Sell signals some improvement in the technical outlook for Trio Mercantile & Trading Ltd, the company’s fundamental and valuation challenges remain significant. Investors should weigh the mildly bullish technical signals against the backdrop of weak financial performance, negative EBITDA, and poor long-term growth prospects.

Given the stock’s historical underperformance relative to the Sensex and the NBFC sector, a cautious approach is warranted. The current rating suggests that while the stock may offer some near-term trading opportunities, it remains a risky proposition for long-term investors seeking stable growth and profitability.

Market participants should continue to monitor quarterly financial results and sector developments closely, as any meaningful turnaround in fundamentals could prompt a reassessment of the company’s investment rating in the future.

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