With a market capitalisation of ₹404.00 crores, Albert David's shares have tumbled 35.55% over the past year, significantly underperforming the Sensex's 10.41% gain and the broader pharmaceuticals sector's 6.21% return. The stock currently trades at ₹714.00, down 41.09% from its 52-week high of ₹1,212.00, reflecting mounting investor concerns about the company's deteriorating financial trajectory.
The quarterly results reveal a company grappling with multiple headwinds: contracting revenues, evaporating margins, and a troubling reliance on volatile non-operating income. For a company with an 88-year legacy in the pharmaceutical industry, the current performance represents one of its most challenging periods in recent history.
| Quarter | Net Sales (₹ Cr) | QoQ % | YoY % | Operating Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 87.24 | +23.62% | -11.38% | 2.91% | -3.30 | -3.78% |
| Jun'25 | 70.57 | -5.77% | -21.03% | -15.09% | 7.94 | 11.25% |
| Mar'25 | 74.89 | -9.86% | -15.91% | -6.34% | -10.33 | -13.79% |
| Dec'24 | 83.08 | -15.60% | — | 0.81% | -9.39 | -11.30% |
| Sep'24 | 98.44 | +10.16% | — | 6.33% | 18.07 | 18.36% |
| Jun'24 | 89.36 | +0.34% | — | 1.00% | 18.84 | 21.08% |
| Mar'24 | 89.06 | — | — | 10.75% | 12.91 | 14.50% |
Financial Performance: Revenue Erosion and Margin Collapse
Albert David's Q2 FY26 net sales of ₹87.24 crores represented an 11.38% year-on-year decline, continuing a troubling pattern of revenue contraction that has persisted for three consecutive quarters. Whilst the company managed a 23.62% quarter-on-quarter improvement from the particularly weak Q1 FY26 base of ₹70.57 crores, this sequential recovery offers little comfort when viewed against the broader deterioration in the business.
The company's operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) stood at a meagre ₹2.54 crores in Q2 FY26, translating to an operating margin of just 2.91%—a dramatic compression from the 6.33% margin achieved in the year-ago quarter. This 340 basis point erosion in operating profitability signals fundamental issues with the company's core pharmaceutical operations, likely stemming from a combination of pricing pressure, rising input costs, and operational inefficiencies.
Employee costs have remained stubbornly elevated at ₹27.07 crores in Q2 FY26, representing 31.03% of net sales—a significant burden on a shrinking revenue base. Whilst marginally lower than the ₹29.31 crores spent in Q2 FY25, the relative proportion has increased, suggesting limited success in aligning the cost structure with the reduced business scale.
The profit before tax of negative ₹2.58 crores in Q2 FY26 marks a sharp reversal from the ₹25.13 crores profit recorded in the corresponding quarter last year. After accounting for a tax credit of ₹0.72 crores (reflecting an unusual negative effective tax rate of -27.91%), the company posted a net loss of ₹3.30 crores, wiping out shareholder value and raising serious questions about the sustainability of the current business model.
Critical Margin Deterioration
Albert David's operating margin (excluding other income) has collapsed from 10.75% in Mar'24 to just 2.91% in Sep'25—a staggering 780 basis point erosion in just 18 months. This dramatic compression suggests deep-seated operational challenges that extend beyond cyclical headwinds, potentially indicating structural issues with product mix, pricing power, or cost management capabilities.
The Other Income Dependency: A Dangerous Crutch
One of the most concerning aspects of Albert David's financial profile is its erratic and substantial reliance on non-operating income. In Q2 FY26, the company reported negative other income of ₹2.14 crores, a stark contrast to the ₹20.64 crores windfall recorded in Q2 FY25. This volatility underscores the unsustainable nature of the company's profitability, which has become increasingly dependent on one-time gains rather than core operational performance.
Examining the annual trend reveals the extent of this dependency: in FY25, other income of ₹29.00 crores accounted for a substantial portion of the company's reported profitability, whilst operating profit excluding other income stood at a paltry ₹3.00 crores (just 0.90% margin). The previous year, FY24, saw other income of ₹57.00 crores significantly flatter results, masking underlying operational weakness.
For the first half of FY26, the company's performance has been particularly troubling. Whilst H1 FY26 operating profit excluding other income stood at negative ₹8.11 crores, other income of ₹19.90 crores helped limit the damage. This pattern of using non-recurring gains to offset operational losses is neither sustainable nor indicative of a healthy business trajectory.
Quality of Earnings Concern
The pharmaceutical industry typically generates profits from product sales and manufacturing operations, not from treasury operations or asset sales. Albert David's increasing reliance on volatile other income—which can include gains from investments, asset disposals, or foreign exchange fluctuations—raises serious red flags about the quality and sustainability of reported earnings. Investors should view this dependency as a warning signal rather than a strength.
Balance Sheet Strength: The Silver Lining
Amidst the operational turmoil, Albert David maintains a relatively robust balance sheet that provides some cushion against the current challenges. As of March 2025, the company's shareholder funds stood at ₹392.48 crores, supported by reserves and surplus of ₹386.78 crores. Crucially, the company carries zero long-term debt, positioning it as a net cash entity with minimal financial leverage risk.
Current assets of ₹354.05 crores as of March 2025 comfortably exceed current liabilities of ₹104.18 crores, providing a healthy current ratio and suggesting adequate liquidity to meet short-term obligations. The company's cash flow from operations, however, tells a more concerning story. In FY25, operating cash flow turned negative at ₹28.00 crores, a dramatic reversal from the positive ₹45.00 crores generated in FY24, reflecting deteriorating working capital management and profitability.
Fixed assets have increased to ₹98.78 crores in FY25 from ₹83.39 crores in FY24, suggesting ongoing capital expenditure. Whilst this indicates management's commitment to maintaining and potentially expanding manufacturing capabilities, the question remains whether these investments will translate into improved operational performance and profitability recovery.
| Balance Sheet Item | Mar'25 (₹ Cr) | Mar'24 (₹ Cr) | Change |
|---|---|---|---|
| Shareholder Funds | 392.48 | 382.98 | +2.48% |
| Long-Term Debt | 0.00 | 0.00 | — |
| Current Assets | 354.05 | 371.63 | -4.73% |
| Current Liabilities | 104.18 | 99.05 | +5.18% |
| Fixed Assets | 98.78 | 83.39 | +18.46% |
| Book Value per Share | ₹687.70 | — | — |
Return Metrics: From Excellence to Mediocrity
Albert David's return on capital employed (ROCE) has experienced a precipitous decline, falling from a respectable average of 20.77% over the long term to a shocking negative 13.46% in the latest period. This dramatic reversal indicates that the company is now destroying value on the capital employed in its business—a situation that cannot persist without serious consequences for shareholder wealth.
Similarly, return on equity (ROE) has deteriorated from an average of 11.69% to negative 3.83% in the most recent period. Whilst the historical ROE of 11.69% was already modest by pharmaceutical industry standards, the current negative return represents a fundamental breakdown in the company's ability to generate profits from shareholder capital. For context, quality pharmaceutical companies typically maintain ROE in the range of 15-25%, highlighting the significant underperformance.
The five-year sales growth of just 3.57% annually underscores the company's struggle to expand its top line in a growing pharmaceutical market. More alarming is the five-year EBIT growth rate of negative 244.12%, indicating a catastrophic erosion of operating profitability over the medium term. These figures paint a picture of a company that has lost its competitive edge and operational efficiency.
Profitability Warning
ROCE Collapse: The company's return on capital employed has plunged from a healthy 20.77% average to negative 13.46%, indicating capital is being deployed at a loss. This represents a complete breakdown in operational efficiency and raises urgent questions about management's strategic direction and execution capabilities.
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
When compared to its micro-cap pharmaceutical peers, Albert David's valuation metrics reflect the market's deep scepticism about the company's prospects. With a price-to-book value of 1.03x, the stock trades at a significant discount to peers such as Medico Remedies (6.03x), Jenburkt Pharma (2.53x), and Amanta Healthcare (2.02x). Whilst this might appear to offer value, the discount is entirely justified given the company's loss-making status and deteriorating fundamentals.
The company's average ROE of 11.69% compares unfavourably with Jenburkt Pharma's 18.99% and Medico Remedies' 17.20%, though it outperforms weaker peers like Medicamen Biotech (6.41%) and Zim Laboratories (6.55%). However, the current negative ROE of 3.83% places Albert David at the bottom of the peer group, explaining the valuation discount.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Albert David | NA (Loss Making) | 1.03 | 11.69 | -0.62 | 0.70 |
| Medicamen Biotech | 43.26 | 1.68 | 6.41 | -0.02 | 0.29 |
| Jenburkt Pharma | 14.26 | 2.53 | 18.99 | -0.04 | — |
| Amanta Healthcare | 40.57 | 2.02 | 8.18 | 1.99 | — |
| Medico Remedies | 35.53 | 6.03 | 17.20 | 0.16 | — |
| Zim Laboratories | 62.21 | 1.63 | 6.55 | 0.48 | — |
Albert David's dividend yield of 0.70% (based on a ₹5 per share dividend) provides minimal income compensation for the capital risk, especially given the company's current loss-making status raises questions about the sustainability of even this modest payout. The dividend payout ratio of 16.59% is calculated on historical profits that no longer exist, making future dividend payments uncertain.
Valuation Analysis: Risky Rating Reflects Fundamental Deterioration
Albert David's current valuation grade of "Risky" accurately captures the precarious financial position and uncertain outlook facing the company. The stock's price-to-book value of 1.03x suggests it trades only marginally above its accounting book value of ₹687.70 per share, offering limited downside protection if the business continues to deteriorate.
The company's enterprise value to EBITDA multiple of negative 13.51x reflects the loss-making nature of the business, whilst the EV/Sales ratio of 0.52x indicates the market values the entire revenue stream at roughly half of annual sales—a clear vote of no confidence in the company's ability to generate profits from its operations.
The valuation grade has deteriorated progressively over the past year, moving from "Very Attractive" in November 2024 to "Attractive" in February 2025, and finally to "Risky" in May 2025. This downgrade trajectory mirrors the fundamental deterioration in the business, with the market increasingly pricing in execution risks and profitability concerns.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Albert David's shareholding structure has remained remarkably stable over recent quarters, with promoter holding steady at 62.24% as of December 2025. The Kothari family, through various entities including Kothari Investment And Industries Private Limited (41.36%), maintains firm control over the company, providing governance stability even as operational performance falters.
Foreign institutional investor (FII) holding has remained minimal at 0.60% in the latest quarter, down from 1.01% in March 2025, suggesting international investors have reduced their already negligible exposure to the stock. Mutual fund holding stands at a mere 0.01%, indicating domestic institutional investors have shown virtually no interest in the company despite its micro-cap status and potential turnaround story.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 62.24% | 62.24% | 62.24% | 62.24% | 0.00% |
| FII | 0.60% | 0.60% | 0.84% | 1.01% | 0.00% |
| Mutual Funds | 0.01% | 0.01% | 0.01% | 0.01% | 0.00% |
| Insurance | 1.61% | 1.61% | 1.61% | 1.61% | 0.00% |
| Other DII | 0.03% | 0.04% | 0.03% | 0.02% | -0.01% |
| Non-Institutional | 35.50% | 35.50% | 35.26% | 35.11% | 0.00% |
Insurance holdings have remained flat at 1.61%, whilst other domestic institutional investor (DII) holdings are negligible at 0.03%. The combined institutional holding of just 2.26% reflects the lack of professional investor confidence in the company's near-term prospects. Non-institutional shareholders, comprising retail investors and non-promoter entities, hold 35.50% of the equity, bearing the brunt of the stock's poor performance.
The absence of promoter pledging is a positive, indicating the controlling shareholders have not leveraged their holdings for personal financing. However, the lack of institutional participation suggests sophisticated investors see limited value or excessive risk in the current investment proposition.
Stock Performance: Severe Underperformance Across All Timeframes
Albert David's stock price performance has been dismal across virtually all meaningful timeframes, reflecting the market's loss of confidence in the company's ability to deliver shareholder value. Over the past year, the stock has plunged 35.55%, dramatically underperforming the Sensex's 10.41% gain by a staggering 45.96 percentage points of negative alpha.
The underperformance extends across shorter timeframes as well. Over three months, the stock has declined 17.76% compared to the Sensex's marginal 0.43% gain, whilst the six-month return of negative 11.49% contrasts sharply with the Sensex's 4.50% advance. The stock trades below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—a technical configuration that signals sustained selling pressure and lack of buying interest.
| Period | Stock Return | Sensex Return | Alpha | Sector Return |
|---|---|---|---|---|
| 1 Week | +3.43% | +0.50% | +2.93% | — |
| 1 Month | -2.41% | +0.79% | -3.20% | — |
| 3 Months | -17.76% | +0.43% | -18.19% | — |
| 6 Months | -11.49% | +4.50% | -15.99% | — |
| YTD | -3.51% | -1.16% | -2.35% | — |
| 1 Year | -35.55% | +10.41% | -45.96% | +6.21% |
| 2 Years | -48.49% | +17.65% | -66.14% | — |
| 3 Years | +26.29% | +38.81% | -12.52% | — |
The two-year return of negative 48.49% versus the Sensex's 17.65% gain represents a wealth destruction of epic proportions for shareholders who held through this period. Even over longer timeframes where the stock shows positive absolute returns—such as the five-year return of 70.20%—it has underperformed the Sensex's 63.46% gain when adjusted for the significantly higher volatility and risk involved.
The stock's beta of 1.16 indicates it is 16% more volatile than the broader market, amplifying both gains and losses. Combined with the current negative returns, this high beta classification makes Albert David a "high risk, low return" proposition—precisely the type of investment profile that prudent investors typically avoid.
Technical Analysis: Mildly Bearish Trend with Weak Momentum
From a technical perspective, Albert David's chart presents a uniformly bearish picture. The stock's current trend classification of "Mildly Bearish" represents a marginal improvement from the outright "Bearish" trend that prevailed through much of the second half of 2025, but offers little comfort to investors seeking signs of a sustainable reversal.
Key technical indicators paint a concerning picture. The MACD (Moving Average Convergence Divergence) shows bearish signals on both weekly and monthly timeframes, suggesting downward momentum remains intact. Bollinger Bands indicate "Mildly Bearish" conditions on both weekly and monthly charts, with the stock trading in the lower half of the bands—a configuration typically associated with continued selling pressure.
The stock's position relative to moving averages is particularly telling. Trading at ₹714.00, Albert David sits 2.27% below its 200-day moving average of ₹806.99, 7.33% below its 100-day average of ₹770.48, and 2.27% below its 50-day average of ₹730.55. This alignment, with the stock below all major moving averages, is a classic bearish configuration suggesting the path of least resistance remains downward.
Technical Resistance Levels
Immediate resistance for Albert David lies at the 20-day moving average of ₹692.78, followed by the 50-day average at ₹730.55. A sustained move above the 100-day average of ₹770.48 would be required to signal a meaningful trend reversal. The 52-week high of ₹1,212.00 now stands 69.75% above current levels—a stark reminder of the value destruction over the past year.
Investment Thesis: Quality Concerns and Valuation Risks Dominate
Albert David's investment thesis has deteriorated significantly, as reflected in the company's overall score of 37 out of 100 and "SELL" rating from the proprietary assessment framework. The four-pillar analysis reveals fundamental weaknesses across multiple dimensions that make the stock unsuitable for most investors at current levels.
The valuation pillar carries a "Risky" grade, reflecting not just the absolute valuation metrics but the underlying business quality and earnings sustainability concerns. With the company currently loss-making and facing margin pressures, traditional valuation multiples offer little guidance for fair value estimation.
The quality assessment of "Average" appears generous given recent performance trends. Whilst the company benefits from zero debt and no promoter pledging, the collapsing profitability metrics, negative cash flows, and deteriorating returns on capital suggest the quality grade may be lagging the fundamental reality.
The financial trend classification of "Positive" based on Q4 FY25 data appears outdated and inconsistent with the subsequent quarterly results showing losses. This highlights the importance of focusing on the most recent data rather than lagging assessments.
Key Strengths and Risk Factors
KEY STRENGTHS ✓
- Zero Debt Position: Company maintains a debt-free balance sheet with net cash position, eliminating financial leverage risks.
- Established Legacy: 88-year operating history in pharmaceutical manufacturing provides brand recognition and industry relationships.
- Diversified Product Portfolio: Presence across pharmaceutical formulations, infusion solutions, herbal dosage forms, and bulk drugs offers revenue diversification.
- Strong Balance Sheet: Shareholder funds of ₹392.48 crores and healthy current ratio provide financial stability.
- No Promoter Pledging: Zero pledged shares indicate promoter confidence and eliminate forced selling risks.
- Stable Promoter Holding: Consistent 62.24% promoter stake ensures governance stability and aligned interests.
KEY CONCERNS ⚠️
- Persistent Losses: Q2 FY26 loss of ₹3.30 crores marks continued profitability deterioration with no clear turnaround in sight.
- Revenue Contraction: Three consecutive quarters of YoY sales decline indicating loss of market share or pricing power.
- Margin Collapse: Operating margin plunged from 10.75% to 2.91%, suggesting fundamental operational challenges.
- Negative ROCE: Return on capital employed of -13.46% indicates value destruction on deployed capital.
- Other Income Dependency: Erratic non-operating income masks underlying operational weakness and raises earnings quality concerns.
- Negative Operating Cash Flow: FY25 operating cash outflow of ₹28.00 crores signals deteriorating business fundamentals.
- Minimal Institutional Interest: Just 2.26% institutional holding reflects lack of professional investor confidence.
- Severe Stock Underperformance: 35.55% decline over past year with negative alpha across all timeframes.
Outlook: What to Watch For
POSITIVE CATALYSTS
- Return to quarterly profitability with sustainable operating margins above 8-10%
- Revenue growth resumption with market share gains in core pharmaceutical segments
- Stabilisation of employee costs as percentage of sales below 25%
- Positive operating cash flow generation for two consecutive quarters
- ROCE improvement back above 10% indicating efficient capital deployment
RED FLAGS
- Further quarterly losses or deterioration in operating margins below current levels
- Continued revenue decline for a fourth consecutive quarter
- Sustained negative operating cash flows depleting cash reserves
- Any increase in debt levels or erosion of balance sheet strength
- Further FII or institutional investor exits reducing already minimal holdings
The Verdict: Avoid Until Turnaround Evidence Emerges
Score: 37/100
For Fresh Investors: Avoid initiating positions. The company's deteriorating fundamentals, persistent losses, collapsing margins, and negative returns on capital present unacceptable risk-reward dynamics. Wait for at least two consecutive quarters of profitable growth with operating margins above 8% before considering entry.
For Existing Holders: Consider reducing exposure or exiting positions, particularly for those holding unrealised losses. The 35.55% decline over the past year may continue absent concrete evidence of operational turnaround. The minimal institutional interest and bearish technical setup suggest limited near-term support. Use any technical rallies towards ₹750-770 levels as exit opportunities.
Fair Value Estimate: Given the loss-making status and deteriorating fundamentals, traditional valuation methods offer limited guidance. The stock trades at 1.03x book value of ₹687.70, suggesting minimal downside protection. A return to profitability with 8-10% operating margins would be required to justify current levels, implying significant downside risk if losses persist.
Rationale: The SELL rating reflects the confluence of operational deterioration, margin compression, negative cash flows, and absence of visible catalysts for recovery. Whilst the debt-free balance sheet provides some cushion, the rate of profitability erosion and lack of institutional confidence make this a high-risk proposition unsuitable for most portfolios. Only aggressive turnaround investors with high risk tolerance should consider involvement, and only after clear evidence of stabilisation emerges.
Note: ROCE = (EBIT - Other Income) / (Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk of loss.
