Are NESCO Ltd latest results good or bad?

NESCO Ltd's latest financial results for Q2 FY26 present a mixed operational picture. The company achieved record revenue of ₹239.18 crores, reflecting a year-on-year growth of 24.51% and a sequential increase of 23.71% from the previous quarter. This growth is attributed to strong demand for commercial space within the IT Park segment, particularly from technology and financial services clients.
However, alongside this revenue growth, there has been a notable decline in operating margins. The operating margin (excluding other income) decreased to 56.91%, down from 62.23% in the same quarter last year, indicating a contraction of 532 basis points. Similarly, the profit after tax (PAT) margin fell to 49.72%, a decrease from 55.64% year-on-year. This margin compression raises concerns about the sustainability of the company's profitability, suggesting potential challenges from rising costs or competitive pressures.

NESCO's net profit for the quarter was ₹118.91 crores, which represents an 11.26% increase year-on-year, although this growth rate is slower than the revenue increase, highlighting the impact of margin pressures. The company also reported a decrease in other income, which fell to ₹24.40 crores, contributing to the moderation in overall profit growth.

The company maintains a strong balance sheet with zero long-term debt and a net cash position of approximately ₹1,500 crores, providing financial flexibility for future investments or shareholder returns. However, the recent quarter's results have prompted an adjustment in its evaluation, reflecting the concerns surrounding margin stability and growth sustainability.

Overall, while NESCO Ltd has demonstrated strong revenue growth, the decline in operating and PAT margins suggests that investors should closely monitor the company's ability to maintain its profitability in the face of rising costs and competitive dynamics in the commercial real estate sector.