Why is TVS Supply falling/rising?

Recent Price Movement and Market Context

On 21-Nov, TVS Supply Chain Solutions recorded a gain of ₹0.65, outperforming its sector by 1.94%. This rise comes despite the stock trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, which typically indicate bearish momentum. The delivery volume on 20 Nov surged to 4.81 lakh shares, a 31.94% increase over the five-day average, suggesting heightened investor interest and participation. Liquidity remains adequate, with the stock supporting trade sizes of approximately ₹0.16 crore based on recent average traded values.

Long-Term Underperformance Against Benchmarks

Despite the recent bounce, TVS Supply Chain’s longer-term performance remains weak. The stock has declined by 6.90% over the past week and 10.24% in the last month, while the Sensex has gained 0.79% and 0.95% respectively over the same periods. Year-to-date, the stock has plummeted 36.08%, starkly contrasting with the Sensex’s 9.08% rise. Over the past year, the stock’s return stands at -36.98%, whereas the Sensex has appreciated by 10.47%. This persistent underperformance extends to multi-year horizons, with the stock lagging broader market indices and sector peers.

Fundamental Strengths Supporting the Recent Uptick

On the positive side, TVS Supply Chain Solutions reported its highest annual operating cash flow of ₹524.20 crore in the latest financial year ending September 2025. Profit after tax for the latest six months rose to ₹148.79 crore, reflecting a significant 302% increase in profits over the past year. The company’s half-year return on capital employed (ROCE) reached a peak of 8.72%, while the trailing ROCE stands at 4.3, indicating an attractive valuation relative to capital employed. The enterprise value to capital employed ratio of 1.9 further suggests the stock is trading at a discount compared to its peers’ historical averages. Additionally, the company’s PEG ratio of 0.1 implies that the stock may be undervalued relative to its earnings growth potential.

Persistent Weaknesses and Risks Temper Optimism

However, these positives are tempered by several fundamental weaknesses. The company’s operating profits have contracted at a compound annual growth rate (CAGR) of -1.29% over the last five years, signalling weak long-term growth. Its ability to service debt is also a concern, with an average EBIT to interest coverage ratio of just 0.80, indicating limited cushion to meet interest obligations. Return on equity (ROE) remains low at an average of 3.86%, reflecting modest profitability relative to shareholders’ funds. Furthermore, nearly 29.23% of promoter shares are pledged, which can exert additional downward pressure on the stock price during market downturns. These factors contribute to the stock’s classification as a strong sell by some analysts.

Conclusion: A Tentative Recovery Amid Structural Challenges

In summary, the recent rise in TVS Supply Chain Solutions’ stock price on 21-Nov appears to be a short-term rebound following a sustained downtrend. The increase in delivery volumes and outperformance relative to the sector suggest renewed investor interest, possibly driven by the company’s improved profitability metrics and attractive valuation multiples. Nonetheless, the stock remains significantly below key moving averages and continues to underperform major benchmarks over multiple timeframes. Long-term investors should weigh the company’s operational cash flow strength and profit growth against its weak debt servicing capacity, low return on equity, and high promoter share pledging. These factors collectively indicate that while the stock may offer value opportunities, caution is warranted given the structural headwinds and historical underperformance.

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