Are Khaitan Chemical latest results good or bad?

Khaitan Chemicals has reported its financial results for the second quarter of FY26, showcasing significant year-on-year growth. The company achieved a net profit of ₹21.48 crores, a remarkable turnaround from the net loss of ₹3.07 crores in the same quarter last year, reflecting a substantial improvement in operational performance. Revenue for the quarter reached ₹308.60 crores, marking a 33.80% increase compared to the previous year, driven by heightened demand for single super phosphate fertilisers and improved pricing.
However, while revenue growth is notable, the company faced challenges in maintaining profitability. The operating margin contracted to 10.08%, down from 13.53% in the previous quarter, indicating pressures from rising input costs or competitive pricing dynamics. Additionally, the profit after tax (PAT) margin decreased to 6.96%, down from 9.14% in the prior quarter, suggesting that despite revenue expansion, profitability is under strain.

The company's return on equity (ROE) stands at 11.91%, which is below industry standards, highlighting concerns regarding capital efficiency. The average return on capital employed (ROCE) also reflects volatility, with a recent figure of -8.16% for FY25, raising questions about the sustainability of earnings generation.

In terms of balance sheet health, while shareholder funds have seen a slight increase, long-term debt has risen significantly, indicating higher borrowings to support working capital and expansion. The current ratio remains reasonable, but the high level of trade payables necessitates careful monitoring.

Overall, Khaitan Chemicals has demonstrated strong revenue growth and a record quarterly net profit, yet faces ongoing challenges related to profitability, return ratios, and elevated debt levels. The company saw an adjustment in its evaluation, reflecting these mixed operational trends. The outlook will depend on its ability to sustain revenue growth while addressing the structural profitability issues highlighted in the results.