Are Abate As Indust latest results good or bad?

Abate As Industries has reported notable financial results for Q2 FY26, indicating a significant operational revival after a prolonged period of inactivity. The company achieved a net profit of ₹4.07 crores, reflecting a substantial quarter-on-quarter increase, while revenue reached ₹42.13 crores, marking the highest quarterly revenue since operations resumed. This growth trajectory began in Q4 FY25, with revenues gradually increasing from ₹14.09 crores to ₹41.06 crores in Q1 FY26 and now to ₹42.13 crores in Q2 FY26.
The operating profit also showed a positive trend, rising to ₹3.85 crores, which is a considerable improvement from the previous quarter. The operating margin expanded to 9.14%, and the profit after tax (PAT) margin increased to 9.66%, both indicating enhanced operational efficiency and cost management as the company scales its activities.

However, while the financial metrics suggest a revival, there are underlying concerns regarding the sustainability of this growth. The quality of earnings is under scrutiny, as a significant portion of profit before tax was derived from other income, raising questions about the core operational profitability. Additionally, the company's return on equity (ROE) and return on capital employed (ROCE) remain extremely low, suggesting challenges in capital efficiency.

The shareholding pattern indicates a decline in promoter holdings, which may raise governance concerns, particularly given the absence of institutional investors. The company's valuation metrics also appear stretched, with a high price-to-earnings ratio compared to peers, which could imply elevated expectations for future growth.

Overall, Abate As Industries has demonstrated a remarkable turnaround in its operational performance, yet the sustainability of this growth, along with concerns regarding capital efficiency and governance, warrants careful monitoring. The company saw an adjustment in its evaluation, reflecting these mixed operational trends and financial realities.