Are Arrow Greentech Ltd latest results good or bad?

Arrow Greentech Ltd's latest financial results for Q2 FY26 reflect significant operational challenges. The company reported net sales of ₹61.07 crores, which represents a year-on-year decline of 5.81% compared to ₹64.84 crores in Q2 FY25. While there was a sequential recovery of 46.80% from the previous quarter, this rebound does not offset the negative year-on-year growth trend, marking the second consecutive quarter of declining sales. Net profit for the same quarter stood at ₹15.74 crores, down 15.65% from the previous year, indicating a concerning trend in profitability. The operating margin also contracted sharply to 33.98%, down from 40.56% in the corresponding quarter last year, reflecting significant cost pressures that the company has been unable to manage effectively. The financial performance highlights a deterioration in capital efficiency, with the return on capital employed (ROCE) plummeting to 31.99% in H1 FY26, the lowest level recorded. This decline raises questions about the company's ability to generate attractive returns for shareholders moving forward. Additionally, Arrow Greentech's valuation metrics suggest a disconnect between its market price and underlying fundamentals, as the company trades at a premium price-to-book ratio of 4.49x, which appears unjustified given the recent operational deterioration. Overall, the results indicate that Arrow Greentech is grappling with significant headwinds, leading to an adjustment in its evaluation. Investors should closely monitor future performance for signs of stabilization in margins and revenue growth.