Are Thermax latest results good or bad?

Thermax's latest financial results for Q2 FY26 indicate a challenging operational environment. The company reported a net profit of ₹119.66 crores, reflecting a significant decline of 39.27% year-on-year. Revenue also contracted by 5.42% to ₹2,473.90 crores compared to the same quarter last year. This decline in revenue is concerning, especially as it follows a period of robust growth in FY25.
The operating margin for the quarter was recorded at 6.95%, which is notably the lowest in recent history, down from 10.63% in the corresponding quarter last year. This margin compression highlights the pressures on operational efficiency, exacerbated by rising employee costs and increased depreciation expenses. The operating profit before depreciation, interest, and tax fell sharply to ₹172.03 crores, marking a 38.11% decline year-on-year.

Despite a sequential revenue improvement of 14.66% from the previous quarter, the net profit showed a decline of 21.47%, indicating that the revenue growth did not translate into improved profitability. The company's profitability metrics, including the PAT margin, which fell to 4.83%, suggest ongoing challenges in maintaining operational effectiveness.

Additionally, the company's reliance on non-operating income has raised concerns about the sustainability of its earnings, as this income constituted nearly half of the profit before tax. The balance sheet also reflects rising leverage, with long-term debt increasing, resulting in a higher debt-to-equity ratio.

In light of these results, Thermax has experienced an adjustment in its evaluation, reflecting the current operational difficulties and financial pressures. Overall, the financial data indicates that Thermax is navigating a period of significant challenges, with key metrics pointing to a need for strategic focus on restoring profitability and operational efficiency.