Are Tarmat Ltd latest results good or bad?

Tarmat Ltd's latest financial results present a complex picture. In Q2 FY26, the company reported a net profit of ₹1.46 crores, which reflects a substantial year-on-year growth of 256.10% compared to ₹0.41 crores in Q2 FY25. However, this profit surge is largely attributed to exceptional non-operating income, raising concerns about the sustainability of such performance from core operations. The revenue for Q2 FY26 was ₹22.67 crores, indicating a quarter-on-quarter decline of 9.10% from ₹24.94 crores in Q1 FY26, which follows a significant drop of 34.00% in the previous quarter. Year-on-year, revenue grew by 45.60% compared to ₹15.57 crores in Q2 FY25, but this growth must be viewed in the context of a weak prior-year quarter. Operationally, Tarmat's operating margin stood at 4.98%, showing a slight improvement from 4.49% in Q1 FY26, yet this margin remains thin for a construction firm facing rising costs. The profit after tax margin reached 6.44%, the highest in eight quarters, but again, this is heavily influenced by the exceptional income rather than operational efficiency. The company faces significant challenges, including a five-year compound annual growth rate in sales of -17.95%, indicating a long-term decline in revenue generation. Tarmat's return on equity (ROE) and return on capital employed (ROCE) are notably low at 3.63% and 2.24%, respectively, suggesting inefficiencies in capital utilization and a struggle to generate adequate returns for shareholders. In terms of institutional confidence, there has been a decline in foreign institutional investor holdings, which dropped from 2.92% to 1.80% over the last quarter, reflecting a lack of professional investor interest in Tarmat's prospects. Overall, while Tarmat Ltd has reported impressive profit growth in the short term, the underlying operational challenges and structural issues raise questions about the sustainability of its financial performance. The company saw an adjustment in its evaluation, reflecting these ongoing concerns.