Are Anupam Rasayan latest results good or bad?

Anupam Rasayan's latest financial results for Q2 FY26 indicate a notable recovery in net sales, which reached ₹731.40 crores, reflecting a sequential growth of 50.55% compared to the previous quarter. This growth is attributed to improved demand conditions and effective order execution. Year-on-year, revenue growth was even more pronounced at 148.81%, largely due to a low base effect from Q2 FY24, when the industry faced significant destocking pressures.
The company's net profit for the quarter stood at ₹44.39 crores, marking a sequential increase of 30.41%. However, while revenue and profit figures show positive momentum, there are concerns regarding margin performance. The operating margin, excluding other income, contracted sharply to 18.57%, down from 25.58% in Q1 FY26, indicating a compression of 701 basis points. Similarly, the net profit margin decreased to 7.81%, down from 9.97% in the prior quarter. This suggests that Anupam Rasayan is prioritizing volume growth over maintaining pricing power, potentially due to competitive pressures or the need to address inventory backlogs.

Despite the strong revenue growth, the operating profit (PBDIT) increased only modestly by 9.26% to ₹135.79 crores, which is significantly lower than the revenue growth rate. This discrepancy highlights structural margin pressures that the company is currently facing. The gross profit margin also declined to 14.71% from 19.25%, reflecting challenges such as higher raw material costs.

Additionally, Anupam Rasayan's return on equity (ROE) of 3.28% and return on capital employed (ROCE) of 7.34% remain below historical averages, indicating concerns about capital efficiency and the effectiveness of recent investments. The balance sheet shows a significant increase in fixed assets and total debt, suggesting ongoing investments in capacity expansion, but also raising questions about the company's ability to generate adequate returns from these investments.

In summary, while Anupam Rasayan has demonstrated strong revenue recovery, the accompanying margin compression raises fundamental questions about the sustainability of its growth strategy. The company has experienced an adjustment in its evaluation, reflecting the mixed nature of its financial performance in the context of ongoing operational challenges.