Are Royal Orchid Hotels Ltd latest results good or bad?

Royal Orchid Hotels Ltd's latest financial results for the quarter ending September 2025 present a mixed picture, highlighting both revenue growth and significant profitability challenges. The company reported a net sales increase of 12.47% year-on-year, rising from ₹70.41 crores to ₹79.19 crores, indicating solid demand recovery in the hospitality sector. However, this positive top-line performance was overshadowed by a substantial decline in net profit, which fell by 42.93% to ₹4.28 crores compared to the previous year. The operating profit before depreciation, interest, and tax (excluding other income) was ₹13.21 crores, reflecting a slight improvement in operational efficiency with an operating margin of 16.68%. Despite this, the operating margin showed volatility, having contracted from 24.95% in the previous quarter, indicating challenges in cost management. A critical concern for Royal Orchid Hotels is the dramatic increase in interest expenses, which surged by nearly 100% to ₹8.55 crores. This rise in financial costs has significantly impacted profitability, leading to a profit after tax margin decline to 4.53%, down from 9.69% in the same quarter last year. The interest coverage ratio has also weakened, falling to 1.55 times, suggesting that operating profits are barely sufficient to cover interest obligations, raising concerns about financial flexibility. Additionally, the company has seen a notable increase in employee costs, which rose by 18.37% year-on-year, further straining margins. The balance sheet reflects a concerning debt profile, with a debt-to-equity ratio of 2.82 times, indicating high leverage that could pose risks in a capital-intensive industry. Overall, while Royal Orchid Hotels Ltd demonstrated resilience in revenue growth, the significant decline in profitability, rising interest costs, and increasing leverage highlight critical operational challenges that the company must address. The company saw an adjustment in its evaluation, reflecting these underlying financial pressures and operational concerns.