Are KDDL Ltd latest results good or bad?

KDDL Ltd's latest financial results for Q2 FY26 present a complex picture characterized by significant revenue growth alongside declining profitability. The company reported consolidated net sales of ₹516.72 crores, reflecting a year-on-year growth of 30.37% and an 11.12% sequential increase from the previous quarter. This marks a strong demand for its watch manufacturing capabilities.
However, the consolidated net profit for the same quarter was ₹19.38 crores, which represents a decline of 21.09% compared to the previous year and a 5.14% decrease from the prior quarter. This indicates a troubling disconnect between the company's robust sales figures and its profitability, suggesting operational pressures that may require immediate attention.

The operating margin, excluding other income, contracted to 13.94%, down 198 basis points year-on-year, while the PAT margin fell to 6.32%, a decrease of 266 basis points. These declines in margins signal increasing cost pressures that the company is facing, despite the strong revenue growth.

Additionally, the company's financial metrics reveal rising employee costs and interest expenses, which have outpaced revenue growth, further complicating the operational landscape. KDDL Ltd's return on equity (ROE) stands at 10.35%, which is below that of its peers, indicating potential concerns regarding capital efficiency.

In light of these results, KDDL Ltd has experienced an adjustment in its evaluation, reflecting the mixed signals from its financial performance. Investors may want to closely monitor the company's ability to stabilize margins and improve profitability in the upcoming quarters. Overall, while KDDL Ltd has demonstrated impressive revenue growth, the decline in profitability and margin compression raises questions about the sustainability of its current growth trajectory.