Are Lee & Nee Software (Exports) Ltd latest results good or bad?

Lee & Nee Software (Exports) Ltd's latest financial results for Q3 FY26 present a mixed picture. The company reported a net profit of ₹0.11 crores, which reflects a significant sequential increase of 266.67% compared to the previous quarter. However, this figure represents a decline of 42.11% when compared year-on-year. Revenue for the same quarter was ₹2.78 crores, showing a quarter-on-quarter growth of 10.32% from ₹2.52 crores in Q2 FY26, but a year-on-year decline of 13.13% from ₹3.20 crores in Q3 FY25. Despite the sequential profit growth, the underlying operational health raises concerns. The operating margin, excluding other income, was reported at -2.52%, which, although an improvement from -5.56% in the previous quarter, indicates that the core business continues to operate at a loss. The company remains heavily reliant on other income, which contributed ₹0.26 crores in Q3 FY26, to achieve profitability, highlighting a structural weakness in its business model. The financial performance reflects challenges in maintaining revenue levels and operational efficiency, with employee costs consuming a substantial portion of revenue at 49.64%. Additionally, metrics such as return on equity (ROE) at 0.61% and return on capital employed (ROCE) at -1.73% suggest weak capital efficiency, placing the company among the poorer performers in the IT services sector. Overall, while there are signs of sequential recovery in profit and revenue, the persistent operational losses and dependence on non-operating income raise questions about the sustainability of this performance. The company experienced an adjustment in its evaluation, reflecting these ongoing challenges and the need for strategic intervention to address its fundamental issues.