Are Leading Leasing Finance & Investment Company Ltd latest results good or bad?

Leading Leasing Finance & Investment Company Ltd. has reported its financial results for Q2 FY26, which reflect a significant year-on-year recovery in net profit, rising to ₹1.70 crores from a loss of ₹0.23 crores in the same quarter last year, marking an impressive 839.1% growth. Additionally, net sales for the quarter reached ₹11.09 crores, representing a substantial 73.01% increase compared to ₹6.41 crores in Q2 FY25. However, this growth comes amid concerns regarding the sustainability of earnings, as the company has shown a sequential decline in net profit of 70.02% from ₹5.67 crores in Q1 FY26. The profitability margin, indicated by the PAT margin, stands at 15.33%, a notable improvement from a negative margin of -3.59% in the previous year. However, this improvement is overshadowed by the company's heavy reliance on non-operating income, which constituted 75.94% of profit before tax in Q2 FY26. This dependency raises questions about the quality and sustainability of the reported profits. Interest expenses have also risen significantly, increasing by 85.28% year-on-year to ₹10.32 crores, reflecting the company's aggressive borrowing strategy to support its lending operations. The operating profit margin before depreciation, interest, and tax remains high at 97.29%, but this is slightly down from the previous quarter's margin. The company's balance sheet shows a dramatic increase in current liabilities, which surged by 336.28% over the past year, raising concerns about its funding strategy and asset-liability management. The debt-to-equity ratio of 3.99 indicates high financial leverage, making the company sensitive to interest rate fluctuations and credit quality issues. In terms of evaluation, Leading Leasing Finance has experienced an adjustment in its evaluation, reflecting the mixed signals from its financial performance. The company’s operational challenges, particularly the volatility in earnings and reliance on non-recurring income, suggest that while there are growth metrics to highlight, significant risks remain that could impact future performance.