Are Felix Industries Ltd latest results good or bad?

Felix Industries Ltd has reported significant financial results for Q2 FY26, showcasing a remarkable year-on-year growth in both net profit and revenue. The company achieved a net profit of ₹4.79 crores, reflecting a substantial increase compared to the previous year's ₹0.31 crores, which indicates a strong operational turnaround. Revenue for the quarter reached ₹17.38 crores, more than doubling from ₹8.01 crores in the same quarter last year, highlighting the company's expanding presence in the recycling sector. The operating margin for Q2 FY26 stood at 44.36%, marking the highest level in six quarters and a notable improvement from 6.74% in Q2 FY25. This suggests enhanced operational efficiency and effective cost management. Additionally, the profit after tax margin expanded to 30.67% from 3.87% in the prior year, indicating improved pricing power and cost optimization. However, the sequential performance raises some concerns, as revenue declined by 15.71% from Q1 FY26's ₹20.62 crores. This volatility in revenue growth could signal questions about the sustainability of the company's growth trajectory. The rise in employee costs to ₹4.49 crores from ₹2.93 crores in the previous year reflects the company's investment in talent acquisition to support its growth ambitions, although it remains below the revenue growth rate. On a broader scale, Felix Industries recorded annual net sales of ₹36.00 crores for FY25, which represents a modest growth of 9.10% over the previous fiscal year. The operating profit margin for FY25 improved to 22.20% from 15.20% in FY24, indicating consistent margin expansion over the longer term. In terms of capital efficiency, the average return on equity (ROE) was 16.71%, suggesting effective deployment of shareholder capital, while the return on capital employed (ROCE) improved to 8.81%, indicating better capital productivity. However, the company's balance sheet shows rapid expansion, with fixed assets surging significantly, raising questions about working capital management and the sustainability of growth. Notably, there has been a significant decline in promoter holding, which dropped from 50.78% to 32.04% in a single quarter, with the entire remaining stake pledged. This situation raises governance concerns and could impact the company's financial stability. Overall, while Felix Industries has demonstrated impressive growth metrics and operational improvements, the volatility in revenue, governance concerns regarding promoter pledges, and the aggressive balance sheet expansion warrant careful monitoring. The company has seen an adjustment in its evaluation, reflecting these dynamics in its financial performance.