Are Sunil Healthcare latest results good or bad?

Sunil Healthcare's latest financial results reflect a notable return to profitability after a challenging period marked by consecutive quarterly losses. In Q2 FY26, the company reported a net profit of ₹0.91 crores, a significant turnaround from losses in the previous year. This profit recovery is accompanied by an operating margin of 14.49%, the highest in seven quarters, indicating improved cost management and operational efficiency. Revenue for the quarter stood at ₹22.64 crores, showing a year-on-year growth of 5.30% and a sequential increase of 6.79%.
Despite these positive developments, the company continues to face structural challenges. The average return on capital employed (ROCE) and return on equity (ROE) remain low at 4.61% and 4.96%, respectively, highlighting issues with capital efficiency. Additionally, Sunil Healthcare's debt-to-EBITDA ratio is elevated at 6.87 times, raising concerns about financial sustainability, especially in a rising interest rate environment.

The company's operational cash flow has turned positive at ₹11.00 crores for FY25, a significant improvement from the previous year, which reflects better working capital management. However, the absence of institutional interest and the company's micro-cap status limit its appeal to larger investors, contributing to liquidity concerns.

Overall, while Sunil Healthcare has demonstrated a recovery in profitability and operational metrics, the persistent weaknesses in return ratios and high leverage indicate that the sustainability of this turnaround remains uncertain. The company has experienced an adjustment in its evaluation, reflecting these mixed operational trends.