Are Subex latest results good or bad?

Subex's latest financial results for Q2 FY26 present a complex picture of operational performance. The company reported a net profit of ₹2.86 crores, which reflects a significant sequential decline of 77.67% compared to the previous quarter. However, this figure shows a substantial year-on-year increase of 361.29%, although this growth is somewhat misleading due to the low profitability base from Q2 FY25.
Revenue for the same quarter stood at ₹68.91 crores, marking a modest sequential growth of 3.78% from ₹66.40 crores in Q1 FY26. Nevertheless, this revenue is down 7.08% compared to ₹74.16 crores in Q2 FY25, continuing a trend of negative year-on-year growth that has persisted for three consecutive quarters. This indicates ongoing challenges in maintaining consistent revenue streams.

The operating margin improved to 9.11%, the highest in eight quarters, which is a positive development. This improvement is notable when compared to the operating margin of 5.92% in Q1 FY26 and a much lower margin in previous quarters. However, the volatility in margins raises concerns about the sustainability of this improvement.

Return on equity (ROE) remains low at 2.58%, significantly below industry standards, indicating challenges in generating adequate returns for shareholders. The company's reliance on other income to bolster profits has been highlighted, with a notable portion of profit before tax being derived from non-operating sources, which raises questions about the core operational strength.

Additionally, Subex's shareholding structure reveals minimal institutional interest, with only 0.79% held by institutional investors, which may reflect a lack of confidence in the company's prospects.

Overall, while there are some signs of operational improvement, particularly in margins, the persistent revenue decline, low return metrics, and dependency on non-operating income suggest that Subex faces significant structural challenges. The company has seen an adjustment in its evaluation, reflecting the complexities of its financial situation.