Are Sanathan Textiles Ltd latest results good or bad?

Sanathan Textiles Ltd's latest financial results for Q2 FY26 present a complex picture characterized by contrasting operational trends. The company reported a net profit of ₹20.12 crores, which reflects a significant decline of 50.23% quarter-on-quarter and 38.21% year-on-year. This sharp drop in profitability is concerning, particularly as it coincides with a dramatic increase in interest expenses, which surged by 300% to ₹18.48 crores from ₹4.62 crores in the previous quarter. This escalation in interest costs has raised questions about the company's financial sustainability and its ability to service its debt. On the other hand, Sanathan Textiles achieved record revenue of ₹817.99 crores, marking a sequential growth of 9.75% and a year-on-year increase of 10.22%. This revenue growth indicates strong demand in the garments sector and improved order flows, suggesting that the company is experiencing positive topline momentum. However, the disconnect between rising revenues and declining profitability highlights significant operational challenges, particularly related to rising input costs and operational inefficiencies. The operating margin, excluding other income, fell to 7.72%, down from 9.33% in the previous quarter, indicating margin compression. The profit before tax also decreased to ₹33.27 crores from ₹55.34 crores quarter-on-quarter. The profit after tax margin has contracted to 2.46%, which is less than half of the margin achieved in the previous quarter. In terms of balance sheet dynamics, the company's long-term debt has escalated dramatically, raising concerns about its capital structure and financial flexibility. The debt-to-equity ratio remains moderate at 0.52, but the rapid accumulation of debt to fund capital expenditures warrants close monitoring. Overall, while Sanathan Textiles has demonstrated strong revenue growth, the significant decline in profitability and the surge in interest costs present critical challenges that the company must address moving forward. The company saw an adjustment in its evaluation, reflecting these mixed results and the underlying operational headwinds.