Are SIS latest results good or bad?

SIS Ltd's latest financial results for Q2 FY26 present a complex picture characterized by notable revenue growth alongside challenges in profitability. The company reported consolidated net sales of ₹3,758.52 crores, reflecting a year-on-year increase of 14.98% and a sequential growth of 5.92%. This performance marks an all-time high for quarterly revenue, indicating strong demand within its market segment.
However, the net profit for the quarter was ₹80.73 crores, which represents a year-on-year growth of 17.32%, yet it also reflects a decline of 13.15% compared to the previous quarter. This divergence highlights the operational pressures the company faces, particularly from rising employee costs, which surged by 6.61% sequentially, outpacing revenue growth and leading to margin compression. The profit after tax (PAT) margin decreased to 2.15%, down from 2.62% in the prior quarter, underscoring the challenges in maintaining profitability amidst escalating costs.

Operating margins showed a modest improvement, reaching 4.48%, which is slightly above the previous quarter but remains below historical averages. The company's return on equity (ROE) has seen a significant decline to 0.49%, down from an average of 13.96%, indicating deteriorating capital efficiency.

In terms of evaluation, SIS Ltd experienced an adjustment in its evaluation, reflecting the mixed operational trends. While the revenue growth is a positive indicator, the persistent margin pressures and rising costs pose significant challenges for the company's profitability and operational efficiency moving forward. Overall, the results suggest that while SIS Ltd maintains a strong market position, it must navigate substantial cost-related hurdles to sustain its growth trajectory.