Are Cohance Lifesciences Ltd latest results good or bad?

Cohance Lifesciences Ltd's latest financial results for the second quarter of FY26 reveal significant operational challenges. The company reported net sales of ₹555.57 crores, reflecting a year-on-year decline of 7.98% compared to ₹603.77 crores in Q2 FY25, although there was a marginal sequential improvement of 1.14% from ₹549.31 crores in Q1 FY26. This revenue volatility underscores the unpredictable nature of the contract development and manufacturing organization (CDMO) business. Net profit for the quarter stood at ₹74.08 crores, which represents a substantial year-on-year decrease of 46.50% from ₹138.47 crores in the same quarter last year. However, it showed a notable sequential increase of 51.55% from ₹48.88 crores in Q1 FY26, indicating some recovery in the short term. Operating margins also experienced significant compression, with the operating margin (excluding other income) declining to 21.77%, down 1,224 basis points from 34.01% in Q2 FY25. While there was a slight sequential improvement of 138 basis points from 20.39% in Q1 FY26, the overall trend indicates ongoing pressure on profitability. The company's return on capital employed (ROCE) decreased to 31.49%, below its five-year average of 36.53%, signaling a decline in capital efficiency. The balance sheet reflects aggressive capital deployment, with fixed assets increasing significantly, raising concerns about the sustainability of returns on these investments. Cohance Lifesciences has seen an adjustment in its evaluation, as market perceptions shift in response to these deteriorating financial trends and competitive pressures within the pharmaceutical outsourcing landscape. The absence of dividend payments and the substantial premium valuation further complicate the investment outlook, as the company navigates through these operational challenges. Overall, the results indicate a complex situation for Cohance Lifesciences, characterized by both short-term recovery signs and long-term structural issues.