Are Neogen Chemicals Ltd latest results good or bad?

Neogen Chemicals Ltd's latest financial results for Q3 FY26 present a mixed picture. The company achieved its highest-ever quarterly revenue of ₹220.02 crores, reflecting a year-on-year growth of 9.23% and a sequential increase of 5.44%. However, this revenue growth is overshadowed by a significant decline in profitability, with net profit plummeting to ₹3.69 crores, a decrease of 63.14% compared to the same quarter last year. The operating margin also faced pressure, contracting to 14.50%, down from 17.20% a year ago, indicating challenges in maintaining profitability amid rising costs. This margin compression is attributed to increased raw material prices and higher employee expenses, which have risen significantly as a percentage of revenue. Additionally, interest costs surged by 60.16% year-on-year, further eroding the company's profit margins and highlighting the impact of its elevated debt levels. On a broader scale, the company's financial metrics indicate a deterioration in operational efficiency, with the return on equity (ROE) declining to 4.41%, well below the typical threshold for value creation. The interest coverage ratio has also weakened, now standing at 1.48 times, suggesting that the company is barely generating enough operating profit to cover its interest obligations. Overall, while Neogen Chemicals has demonstrated strong revenue growth, the substantial decline in net profit and the challenges related to rising costs and debt levels raise concerns about its operational sustainability. The company has experienced an adjustment in its evaluation, reflecting these underlying issues. Investors should monitor the company's ability to navigate these challenges in the coming quarters.