Are Thomas Scott India Ltd latest results good or bad?

Thomas Scott India Ltd's latest financial results for Q2 FY26 highlight a significant growth trajectory, marked by expanding operating margins and robust revenue and profit figures. The company reported net sales of ₹56.93 crores, reflecting a quarter-on-quarter growth of 5.64% and a year-on-year increase of 39.98%. This marks the seventh consecutive quarter of revenue growth, showcasing the company's ability to maintain momentum in a competitive market. Net profit for the quarter reached ₹4.72 crores, which represents a sequential increase of 36.02% and a substantial year-on-year growth of 66.78%. The operating margin reached a record high of 14.86%, up from 11.34% in the previous quarter, indicating improved operational efficiency and cost management. Despite these positive developments, the company experienced a notable working capital outflow, which led to negative operating cash flow for FY25, raising questions about the sustainability of its growth without further equity or debt financing. Additionally, the company's return on equity (ROE) of 11.35% and return on capital employed (ROCE) of 14.56% suggest that there is room for improvement in capital efficiency. Overall, Thomas Scott's performance reflects a strong operational foundation, but the recent adjustment in its evaluation indicates a recognition of the challenges ahead, particularly regarding cash flow management and capital efficiency. The company's ability to sustain its growth while optimizing margins will be crucial as it navigates the complexities of the apparel retail sector.