TVS Supply Chain Solutions Ltd Upgraded to Sell on Technical Improvements Despite Lingering Fundamental Challenges

Technical Trend Improvement Spurs Upgrade

The primary catalyst for the rating upgrade lies in the technical domain, where TVS Supply Chain Solutions has transitioned from a bearish to a mildly bearish trend. Weekly technical indicators such as the Moving Average Convergence Divergence (MACD) remain bearish, but monthly signals show a more neutral stance. The Relative Strength Index (RSI) on a monthly basis has turned bullish, signalling potential momentum building over the medium term.

Bollinger Bands continue to indicate mild bearishness on both weekly and monthly charts, while daily moving averages remain bearish, reflecting short-term caution. However, the On-Balance Volume (OBV) indicator on a weekly scale has turned mildly bullish, suggesting accumulation by investors despite recent price weakness. The KST oscillator remains bearish weekly, and Dow Theory shows no clear trend, underscoring a market in transition rather than outright decline.

Price action supports this technical shift, with the stock closing at ₹97.10 on 3 February 2026, up 0.82% from the previous close of ₹96.31. The stock’s 52-week range remains wide, with a high of ₹160.00 and a low of ₹92.40, indicating significant volatility but recent price stabilisation near the lower end of this range.

Valuation Attractiveness Amidst Profit Growth

Despite the stock’s underperformance relative to benchmarks, valuation metrics present a more encouraging picture. TVS Supply Chain Solutions trades at an Enterprise Value to Capital Employed ratio of 1.7, which is considered attractive compared to its peers’ historical averages. This discount valuation is notable given the company’s recent profit surge, with profits rising by 302% over the past year.

The Price/Earnings to Growth (PEG) ratio stands at a low 0.1, signalling that the stock’s price is not fully reflecting its earnings growth potential. This valuation appeal is tempered by the stock’s negative total returns of -33.54% over the last year, which contrasts with the Sensex’s positive 5.37% return over the same period. The stock has also underperformed the BSE500 index over one year and three months, highlighting challenges in market sentiment.

Financial Trend: Mixed Signals from Recent Results

TVS Supply Chain Solutions reported positive financial performance in Q2 FY25-26, with operating cash flow reaching a yearly high of ₹524.20 crores and a half-year Return on Capital Employed (ROCE) of 8.72%, the highest recorded in recent periods. The company’s debt-equity ratio improved to a low 1.14 times, indicating better capital structure management.

However, long-term financial trends remain weak. The company’s operating profit compound annual growth rate (CAGR) over the last five years is negative at -1.29%, signalling deteriorating profitability. The average EBIT to interest coverage ratio is a concerning 0.84, reflecting limited ability to service debt comfortably. Return on Equity (ROE) averages just 3.86%, indicating low profitability relative to shareholders’ funds.

Promoter shareholding dynamics add to the cautionary tone, with 31.87% of promoter shares pledged. This proportion has increased by 2.64% over the last quarter, raising concerns about potential selling pressure in falling markets.

Quality Assessment: Weak Fundamentals Despite Operational Strength

TVS Supply Chain Solutions’ quality grade remains low, consistent with its overall Mojo Grade of Sell (upgraded from Strong Sell). The company’s weak long-term fundamental strength and low profitability metrics weigh heavily on quality assessments. While operational cash flows and ROCE have improved recently, these gains have not yet translated into sustained profitability or robust returns for shareholders.

The company’s industry position in transport services and logistics is competitive, but the stock’s underperformance relative to the Sensex and BSE500 indices over multiple time frames highlights challenges in market confidence. The combination of high promoter pledged shares and weak debt servicing capacity further detracts from the quality outlook.

Stock Performance in Context

Examining the stock’s returns relative to the Sensex provides further insight into its market challenges. Over the past week, TVS Supply Chain Solutions outperformed the Sensex with a 3.13% gain versus 0.16%. However, over longer periods, the stock has lagged significantly. One month returns are down 15.05% compared to the Sensex’s -4.78%, and year-to-date returns show a decline of 13.03% against the Sensex’s -4.17%.

Most notably, the stock has delivered a negative 33.54% return over the last year, while the Sensex gained 5.37%. Over three and five years, the stock’s returns are not available, but the Sensex’s gains of 36.26% and 64.00% respectively underscore the stock’s relative underperformance. The 10-year Sensex return of 232.80% further highlights the long-term opportunity cost of holding this stock.

Conclusion: A Cautious Upgrade Reflecting Mixed Fundamentals

The upgrade of TVS Supply Chain Solutions Ltd’s rating from Strong Sell to Sell reflects a nuanced reassessment of its prospects. Technical indicators have improved modestly, signalling a potential bottoming out of the stock’s downtrend. Valuation metrics suggest the stock is trading at a discount relative to peers, supported by a remarkable profit growth of 302% over the past year.

Nonetheless, fundamental weaknesses remain pronounced. The company’s long-term operating profit decline, low profitability ratios, and high promoter pledged shares continue to weigh on investor confidence. Debt servicing capacity is weak, and the stock’s sustained underperformance relative to market benchmarks signals ongoing challenges.

Investors should weigh these mixed signals carefully. While the technical and valuation improvements offer some optimism, the underlying quality and financial trends counsel caution. The current Sell rating reflects this balanced view, suggesting that while the stock may no longer be a strong sell, it remains a risky proposition in the transport services sector.

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