Are Kalyani Forge Ltd latest results good or bad?

Kalyani Forge Ltd's latest financial results for Q2 FY26 indicate a challenging operational environment. The company reported net sales of ₹55.67 crores, reflecting a year-on-year decline of 10.69% and a quarter-on-quarter decrease of 13.19%. This marks the lowest revenue level in recent quarters, suggesting potential demand softness or specific challenges within its precision forging segment. Net profit for the quarter was ₹2.15 crores, which represents a significant year-on-year decline of 45.15%. This decline is attributed to rising interest costs, which increased by 53.80% compared to the previous year, alongside normalising tax rates. Despite these challenges, Kalyani Forge did see an improvement in its operating margin, which rose to 11.77% from 9.26% in the previous quarter, indicating better cost management and operational efficiency. The company's return on equity (ROE) remains modest at 4.97%, with a return on capital employed (ROCE) averaging just 4.06% over recent years. These figures highlight concerns regarding capital efficiency and profitability relative to industry standards. Additionally, Kalyani Forge's financial flexibility is constrained by a net debt-to-equity ratio of 0.77 and a weak interest coverage ratio of 1.44x. Overall, Kalyani Forge's performance in this quarter reflects significant operational challenges, with a notable revenue contraction overshadowing the improvement in margins. The company has experienced an adjustment in its evaluation, reflecting these underlying trends and financial metrics.