Are HEC Infra Proj. latest results good or bad?

HEC Infra Projects has reported its Q2 FY26 results, showcasing a significant year-on-year revenue growth of 102.10%, with net sales reaching ₹40.50 crores compared to ₹20.04 crores in the same quarter last year. This performance reflects strong demand and effective execution of its order book, particularly in the electro-mechanical and solar EPC segments. The company's net profit also saw an increase of 81.30%, amounting to ₹2.23 crores, indicating a positive trend in profitability.
However, while the revenue figures are impressive, the operating margin has contracted to 8.72%, down from 19.20% in the previous quarter, raising concerns about the sustainability of profitability as the company scales its operations. The profit after tax margin stands at 5.51%, which, although improved from the prior year's 6.14%, remains below the levels achieved in Q4 FY25. This margin pressure suggests that the rapid expansion may be impacting operational efficiency.

The company's return on equity has improved to 18.18%, reflecting enhanced capital efficiency, but the return on capital employed is at 5.89%, indicating challenges in total capital efficiency. Additionally, HEC Infra is experiencing significant working capital pressures, with negative operating cash flow of ₹26.00 crores reported for FY25, which could raise concerns about cash generation capabilities moving forward.

Overall, HEC Infra's latest results highlight a strong growth trajectory in sales and net profit, yet they also underscore the need for careful monitoring of margin stability and cash flow dynamics. The company has seen an adjustment in its evaluation, reflecting these mixed operational trends.