Are SMS Pharma. latest results good or bad?

The latest financial results for SMS Pharmaceuticals for Q2 FY26 indicate a notable operational performance. The company reported consolidated net profit of ₹25.31 crores, reflecting a significant year-on-year increase of 79.50%. Revenue also demonstrated strong growth, reaching ₹242.43 crores, which marks a 23.22% increase compared to the same quarter last year.
The operating margin, excluding other income, was reported at 19.95%, which is a substantial improvement of 396 basis points from the previous year. The profit after tax (PAT) margin also saw a year-on-year increase, reaching 10.37%, up by 333 basis points.

On a sequential basis, the results show a 23.66% increase in net sales from ₹196.05 crores in Q1 FY26 to ₹242.43 crores in Q2 FY26. The consolidated net profit increased by 23.52% from the previous quarter.

However, while the overall financial performance appears strong, the company’s return on equity (ROE) and return on capital employed (ROCE) remain modest compared to industry benchmarks, indicating potential challenges in capital efficiency. Additionally, the balance sheet reflects a mixed picture with increased long-term debt, which may warrant further scrutiny.

Overall, SMS Pharmaceuticals has demonstrated operational momentum with improved profitability metrics, although the sustainability of this growth trajectory and the company's valuation relative to its performance may require careful consideration. The company saw an adjustment in its evaluation based on these results.