Are Semac Construct latest results good or bad?

Semac Construction's latest financial results for Q2 FY26 present a mixed picture, highlighting both revenue growth and ongoing challenges in profitability. The company reported consolidated net sales of ₹57.30 crores, reflecting an 11.09% increase from the previous quarter and a significant 76.20% growth year-on-year. This indicates the company's ability to secure contracts and execute projects effectively.
However, the consolidated net profit turned negative at ₹0.01 crores, marking a dramatic decline from the profit of ₹1.05 crores in the prior quarter. This volatility in profitability raises concerns about the sustainability of the company's earnings. The operating profit margin, excluding other income, was recorded at 2.01%, slightly lower than the previous quarter's 2.37%, indicating ongoing pressure on margins.

The company has shown a transition from a loss-making entity in FY24 to marginal profitability in FY25, yet the current fiscal year reflects fragility in this turnaround, as evidenced by the significant quarter-to-quarter fluctuations in profit. The heavy reliance on other income, which constituted a substantial portion of profit before tax, raises questions about the quality of earnings.

Additionally, the company faces challenges related to rising interest costs, which increased by 26.50% quarter-on-quarter, further straining profitability. The debt-to-equity ratio has reached a concerning level of 6.33 times, indicating aggressive leverage that amplifies financial risk.

In summary, while Semac Construction has achieved notable revenue growth, the inability to convert this into consistent profitability, coupled with high leverage and operational challenges, suggests that the company's financial health remains precarious. The company saw an adjustment in its evaluation, reflecting these ongoing concerns and the mixed operational performance.