Are Silver Touch latest results good or bad?

Silver Touch Technologies reported its Q2 FY26 results, showcasing a notable performance characterized by strong revenue growth and significant profit increases. The company's net sales reached ₹85.52 crores, reflecting a year-over-year growth of 14.26%, although this is a decrease from the previous year's growth rate of 44.64%. The net profit for the quarter was ₹7.46 crores, marking a substantial year-over-year increase of 69.55%, compared to a more modest growth of 21.88% in the same quarter last year.
Operationally, the company demonstrated improved efficiency, with operating margins rising to 16.43%, up from 14.39% in the previous quarter. This improvement in margins indicates better cost absorption despite rising employee expenses, which increased to ₹40.89 crores, representing 47.81% of sales. The operating profit, excluding other income, surged by 50.66% year-over-year, highlighting strong operational leverage.

However, the financial landscape is not without challenges. Interest expenses surged to ₹1.98 crores, a 100% increase year-over-year, raising concerns about the sustainability of the company's debt-funded expansion strategy. The operating profit to interest coverage ratio declined to 6.97x, the lowest in recent quarters, suggesting increased financial pressure.

The effective tax rate also saw a significant decline to 22.45% from 30.22% in the previous quarter, which contributed positively to net profit growth. Nevertheless, the company's working capital dynamics warrant attention, as cash flow from operations turned negative at ₹-2.00 crores in FY25, indicating potential liquidity issues.

Overall, Silver Touch Technologies' recent results reflect a complex picture of strong revenue and profit growth alongside rising costs and financial leverage. The company experienced an adjustment in its evaluation, reflecting these mixed operational trends. Investors should monitor the company's ability to sustain growth while managing its financial obligations and working capital effectively.