Are Ramkrishna Forgings Ltd latest results good or bad?

Ramkrishna Forgings Ltd has reported significant financial challenges in its latest results for Q2 FY26. The company experienced a swing from a profit of ₹11.79 crores in Q1 FY26 to a loss of ₹9.50 crores in Q2 FY26, indicating a notable deterioration in profitability. This loss represents a decline of 180.58% quarter-on-quarter. Concurrently, operating margins contracted to 13.50% from 14.64% in the previous quarter, reflecting pressures on cost management and pricing power.
Revenue also declined, falling 10.61% sequentially to ₹907.53 crores, marking the second consecutive quarter of revenue decline. Year-on-year, revenue decreased by 13.87% from ₹1,053.63 crores in Q2 FY25. The combination of rising interest costs, which increased to ₹53.34 crores, and elevated depreciation charges of ₹80.38 crores contributed to the negative profit before tax of ₹10.27 crores.

The financial results reveal a concerning trend of margin compression and declining profitability, with operating profit (PBDIT) excluding other income contracting to ₹122.54 crores from ₹148.61 crores in the previous quarter. The gross profit margin also deteriorated, falling to 8.26% from 10.21% in Q1 FY26, indicating challenges in maintaining pricing amidst rising costs.

In terms of operational efficiency, return on equity (ROE) has declined to 7.27%, down from an average of 13.71% historically, while return on capital employed (ROCE) has dropped to 3.27% from an average of 11.74%. This decline raises concerns about the company’s ability to generate adequate returns on its capital investments.

Overall, Ramkrishna Forgings Ltd's latest financial results highlight significant operational challenges, marked by a swing to loss, declining revenue, and compressed margins. The company has seen an adjustment in its evaluation, reflecting these ongoing difficulties in its financial performance.