Are Sonal Mercantile Ltd latest results good or bad?

Sonal Mercantile Ltd's latest financial results for the quarter ended September 2025 present a mixed picture. The company reported consolidated net sales (interest income) of ₹9.79 crores, reflecting a sequential growth of 4.82% from the previous quarter, which is an improvement compared to the 9.11% growth seen in the prior quarter. Year-on-year, net sales also increased by 7.94% from ₹9.07 crores in the same quarter last year. However, the consolidated net profit declined to ₹7.63 crores, marking a decrease of 9.60% from the previous quarter and a slight decline of 1.93% year-on-year. This drop in profitability is concerning, particularly as the profit after tax (PAT) margin contracted to 23.60%, down from 24.52% in the previous quarter and significantly lower than 29.22% a year ago. This indicates a notable compression in profitability metrics. Interest expenses rose to ₹6.32 crores, which is a 4.46% increase from the previous quarter and a substantial 15.33% increase year-on-year. The rising interest costs are consuming a significant portion of the company's net sales, which raises concerns about the sustainability of its profit margins. Despite a robust operating margin of 96.73%, the elevated interest burden limits the potential for bottom-line growth. The company's return on equity (ROE) stands at 7.29%, which is below the typical standards for quality non-banking financial companies (NBFCs), indicating challenges in capital efficiency. Overall, while Sonal Mercantile Ltd has shown some revenue growth, the declines in net profit, PAT margin, and rising interest expenses suggest underlying operational challenges. The company has experienced an adjustment in its evaluation, reflecting these mixed operational trends. Investors may want to monitor these developments closely as they assess the company's future performance.