Are Servotech Renew latest results good or bad?

Servotech Renew's latest financial results for Q2 FY26 reveal significant challenges in its operational performance. The company reported a net profit of ₹5.24 crore, which reflects a substantial decline of 32.73% compared to the previous quarter. Revenue also saw a decrease, falling by 6.51% to ₹136.75 crore, although it did show year-on-year growth of 21.89% compared to the same quarter last year.
The operating margin for the quarter was recorded at 7.57%, down 77 basis points from the prior quarter, while the profit after tax (PAT) margin contracted to 3.31%, a decrease of 197 basis points. This decline in profitability is attributed to increased interest expenses, which surged by over 109% sequentially, alongside rising depreciation costs and an elevated tax rate.

The financial trend indicates a deterioration in key metrics, with the company's return on equity averaging 11.69%, which is relatively modest given its premium valuation. Additionally, Servotech's cash flow turned negative, driven by significant working capital absorption, raising concerns about liquidity and operational efficiency.

The company has also experienced a revision in its evaluation, reflecting the challenges it faces in justifying its premium market valuation amidst weakening operational performance. Overall, the results suggest that Servotech is navigating a difficult operational landscape, characterized by declining profitability and rising costs, which may impact investor confidence moving forward.