The quarter's standout feature was the dramatic margin expansion, with operating profit (excluding other income) jumping to ₹3.01 crores from ₹1.67 crores in Q2 FY26—the highest quarterly operating profit in the company's recent history. Operating margins reached 6.79%, a substantial improvement from 3.78% in the previous quarter and a stark contrast to the near-breakeven 2.05% recorded in Q3 FY25. This margin recovery signals improved operational efficiency and better cost management despite relatively flat revenue growth.
However, the profitability surge must be viewed against the backdrop of an extraordinary prior-year comparison. In FY25, Baroda Extrusion reported an exceptional net profit of ₹19.00 crores on revenues of ₹159.00 crores, resulting in an unusually high 11.90% PAT margin—a figure that appears anomalous compared to historical performance. The company's Q3 FY26 PAT margin of 4.78%, whilst improved, remains well below that exceptional full-year figure.
Quarterly Trend: Steady Recovery Path
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Operating Profit (₹ Cr) | Op. Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|---|
| Dec'25 | 44.31 | +0.25% | 3.01 | 6.79% | 2.12 | 4.78% |
| Sep'25 | 44.20 | +16.13% | 1.67 | 3.78% | 1.25 | 2.83% |
| Jun'25 | 38.06 | -17.01% | 1.09 | 2.86% | 0.88 | 2.31% |
| Mar'25 | 45.86 | +3.13% | 2.13 | 4.64% | 18.65 | 40.67% |
| Dec'24 | 44.47 | +24.71% | 0.91 | 2.05% | 0.88 | 1.98% |
| Sep'24 | 35.66 | +7.86% | -0.03 | -0.08% | 0.05 | 0.14% |
| Jun'24 | 33.06 | — | 0.17 | 0.51% | 0.14 | 0.42% |
The quarterly progression reveals a business gradually finding its footing after a challenging operational period. Excluding the anomalous Q4 FY25 result, the company has demonstrated consistent sequential improvement in both operating margins and absolute profitability across the first three quarters of FY26.
Financial Performance: Margin Expansion Drives Profitability
In Q3 FY26, Baroda Extrusion posted net sales of ₹44.31 crores, essentially flat quarter-on-quarter with a marginal 0.25% increase from ₹44.20 crores in Q2 FY26. Year-on-year comparison shows a slight 0.36% decline from ₹44.47 crores in Q3 FY25. This revenue stability, whilst not indicative of strong growth momentum, provided a platform for the company to focus on operational improvements.
The real story lies in margin performance. Operating profit before depreciation, interest, and tax (excluding other income) surged to ₹3.01 crores in Q3 FY26, marking the highest quarterly figure in recent history. This translated to an operating margin of 6.79%, a significant 301 basis points improvement from 3.78% in Q2 FY26 and a remarkable 474 basis points expansion from the 2.05% recorded in Q3 FY25.
Profit before tax (PBT) reached ₹2.84 crores in Q3 FY26, up from ₹1.97 crores in Q2 FY26 and ₹0.88 crores in Q3 FY25. The tax incidence was ₹0.72 crores, resulting in a net profit of ₹2.12 crores. The effective tax rate of 25.35% in Q3 FY26 was notably lower than the 37.06% recorded in Q2 FY26, contributing to the bottom-line improvement. Employee costs remained relatively stable at ₹0.56 crores in Q3 FY26 compared to ₹0.36 crores in Q2 FY26.
For the nine-month period (April-December 2025) of FY26, the company has accumulated net sales of ₹126.57 crores with a cumulative net profit of ₹4.25 crores, representing a nine-month PAT margin of 3.36%. This compares favourably to the first nine months of FY25, signalling improved operational stability.
Balance Sheet Concerns: Negative Net Worth Remains Challenge
Whilst operational performance has improved, Baroda Extrusion's balance sheet continues to present structural challenges. As of March 2025, the company reported negative shareholder funds of ₹19.70 crores, comprising share capital of ₹14.90 crores offset by accumulated losses (reserves and surplus) of ₹34.61 crores. This represents an improvement from the ₹39.42 crores negative net worth as of March 2024, reflecting the profitable FY25 performance.
⚠️ Balance Sheet Warning
The company's book value per share stands at ₹-1.32, indicating accumulated losses exceed equity capital. Whilst the FY25 turnaround has begun to repair the balance sheet, full restoration of positive net worth will require sustained profitability over multiple years. Investors should note that negative net worth companies carry elevated financial risk and limited margin for error.
Long-term debt stood at ₹21.11 crores as of March 2025, down significantly from ₹59.37 crores in March 2024, suggesting meaningful debt reduction efforts. Current liabilities increased to ₹31.41 crores from ₹12.82 crores, primarily driven by higher trade payables of ₹24.20 crores (versus ₹11.83 crores in March 2024). This working capital expansion appears tied to increased business activity levels.
On the asset side, fixed assets remain modest at ₹2.41 crores, whilst current assets stood at ₹27.50 crores as of March 2025. The company maintains no long-term investments, indicating a focused operational approach. Cash flow from operations improved dramatically to ₹17.00 crores in FY25 from negative ₹5.00 crores in FY24, demonstrating improved cash generation capability.
Profitability Metrics: ROE Improvement But ROCE Remains Weak
Return on equity (ROE) has shown substantial improvement, with the latest quarterly ROE reaching 24.39%—a significant jump from the average ROE of 6.10% over the past five years. This elevated ROE reflects the combination of improved profitability and negative equity base, which mathematically amplifies return metrics. However, investors should interpret this figure cautiously given the negative net worth context.
Return on capital employed (ROCE) presents a more concerning picture at 1.79% on average, though the latest quarter showed improvement to 22.62%. The weak historical ROCE of 1.79% indicates the company has struggled to generate adequate returns on the total capital deployed in the business. The five-year average EBIT to interest coverage ratio of just 0.28 times highlights past difficulties in servicing debt obligations, though recent quarters show improvement with minimal interest costs.
Capital Efficiency Analysis
Whilst recent ROE figures appear attractive at 24.39%, the negative equity base distorts this metric. The more telling indicator is the sales to capital employed ratio of 8.56 times, suggesting reasonable asset turnover. However, the low historical ROCE of 1.79% indicates that whilst the company generates sales efficiently, converting those sales into operating profits has been challenging. The Q3 FY26 results suggest this dynamic may be improving.
Growth Trajectory: Strong Long-Term CAGR Masks Recent Volatility
Baroda Extrusion demonstrates impressive long-term growth metrics, with five-year sales compound annual growth rate (CAGR) of 31.09% and EBIT growth of 45.76%. These figures reflect the company's recovery from a particularly weak base in FY20, when it recorded losses of ₹15.00 crores on revenues of ₹52.00 crores.
Annual revenue progression shows FY25 sales of ₹159.00 crores, representing 25.20% growth over FY24's ₹127.00 crores. However, this followed a 2.30% decline in FY24 from FY23's ₹130.00 crores. The volatility in year-on-year performance reflects the cyclical nature of the copper extrusion business and the company's exposure to raw material price fluctuations and industrial demand cycles.
| Year | Net Sales (₹ Cr) | YoY Growth | Operating Profit (₹ Cr) | Op. Margin | PAT (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|---|
| FY25 | 159.00 | +25.20% | 3.00 | 1.90% | 19.00 | 11.90% |
| FY24 | 127.00 | -2.30% | -1.00 | -0.80% | -1.00 | -0.80% |
| FY23 | 130.00 | +20.40% | -3.00 | -2.30% | -3.00 | -2.30% |
| FY22 | 108.00 | +107.70% | 1.00 | 0.90% | 1.00 | 0.90% |
| FY21 | 52.00 | 0.00% | 0.00 | 0.00% | 0.00 | 0.00% |
The inconsistent margin performance across years—ranging from negative territory in FY23-FY24 to the exceptional 11.90% PAT margin in FY25—raises questions about earnings sustainability. The company's ability to maintain the improved margin profile demonstrated in recent quarters will be critical for investor confidence.
Peer Comparison: Valuation Premium Without Operational Justification
Baroda Extrusion's valuation metrics appear stretched relative to operational performance and peer group comparisons. The stock trades at a price-to-earnings ratio of 39.10 times trailing twelve-month earnings, substantially above the industrial products sector average of 22 times and significantly higher than most direct peers.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div. Yield |
|---|---|---|---|---|---|
| Baroda Extrusion | 39.10 | 9.54 | 6.10 | 0.27 | — |
| Century Extrusions | 17.12 | 2.08 | 11.04 | 0.70 | — |
| Parmeshwar Metal | 17.72 | 2.47 | 15.50 | 0.12 | 0.55% |
| Galaxy Bearings | 29.70 | 1.77 | 17.86 | -0.09 | — |
| Cubex Tubings | 23.01 | 2.16 | 5.58 | 0.48 | — |
| Sampann Utpadan | 21.40 | 3.61 | 3.37 | 2.10 | — |
More concerning is the price-to-book value ratio of 9.54 times, which appears particularly elevated given the company's negative book value per share of ₹-1.32. This metric is calculated using absolute values and indicates the market is pricing in substantial future earnings recovery and balance sheet repair. Peers typically trade between 1.77 to 3.61 times book value.
From a profitability standpoint, Baroda Extrusion's average ROE of 6.10% lags behind most peers. Century Extrusions delivers 11.04% ROE, Parmeshwar Metal achieves 15.50%, and Galaxy Bearings posts 17.86%. Only Sampann Utpadan (3.37%) and Cubex Tubings (5.58%) report lower ROE figures. The valuation premium appears disconnected from relative operational performance.
Valuation Analysis: Premium Pricing for Turnaround Hope
Baroda Extrusion's current valuation reflects market optimism about the sustainability of recent operational improvements rather than current fundamentals. At ₹9.64 per share, the stock commands a market capitalisation of ₹181.00 crores for a business with negative net worth of ₹19.70 crores and trailing twelve-month net profit that appears elevated by the exceptional Q4 FY25 result.
The enterprise value to EBITDA multiple of 33.32 times and EV to EBIT of 34.20 times both signal expensive valuation territory. The EV to sales ratio of 1.12 times might appear reasonable in isolation, but when combined with the company's historically thin margins and balance sheet constraints, it suggests limited margin of safety.
The proprietary Mojo Score of 57 out of 100 places the stock in "HOLD" territory, up from a "SELL" rating (score of 39) as recently as October 2025. This improvement reflects the positive quarterly financial trend and mildly bullish technical indicators, but the score remains well below levels that would justify fresh investment at current prices.
The valuation grade of "RISKY" has persisted since April 2023, indicating sustained concerns about the risk-reward profile. For a micro-cap company with negative net worth, volatile historical earnings, and no dividend yield, the current valuation multiples offer limited downside protection if operational improvements fail to sustain.
Stock Performance: Volatility Defines Trading Pattern
Baroda Extrusion's stock price behaviour reflects the high-risk, high-reward nature of micro-cap turnaround situations. The shares have delivered extraordinary long-term returns—1,430.16% over five years and 1,790.20% over ten years—but these figures primarily reflect recovery from extremely depressed levels during the company's loss-making years.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | +4.67% | -0.66% | +5.33% |
| 1 Week | +6.40% | +0.43% | +5.97% |
| 1 Month | -15.36% | -0.24% | -15.12% |
| 3 Month | +19.01% | -0.94% | +19.95% |
| 6 Month | +30.45% | +4.29% | +26.16% |
| YTD | +8.07% | -1.81% | +9.88% |
| 1 Year | +14.35% | +9.85% | +4.50% |
| 2 Years | +133.98% | +17.73% | +116.25% |
| 3 Years | +262.41% | +37.89% | +224.52% |
Recent performance shows significant volatility. Whilst the stock has delivered 14.35% returns over the past year, modestly outperforming the Sensex's 9.85% gain, it has dramatically underperformed the industrial products sector's 58.57% return by 44.22 percentage points. The one-month return of -15.36% highlights the sharp corrections that characterise trading in this stock.
The stock's beta of 1.50 (adjusted) confirms its high-volatility profile, with price movements typically 50% more volatile than the broader market. With annualised volatility of 57.31%—five times higher than the Sensex's 11.44%—this stock presents considerable price risk. The risk-adjusted return of just 0.25 over the past year, compared to the Sensex's 0.86, indicates investors are not being adequately compensated for the elevated risk undertaken.
Technical indicators present a mixed picture. The stock trades below all key moving averages—5-day (₹9.17), 20-day (₹9.80), 50-day (₹9.27), 100-day (₹8.72), and 200-day (₹8.67)—suggesting recent weakness despite the quarterly results bounce. The overall technical trend is classified as "MILDLY BULLISH" as of February 2026, having shifted from "BULLISH" in late January. MACD shows bullish signals on weekly charts but mildly bearish on monthly timeframes, whilst Bollinger Bands indicate bullish positioning.
Investment Thesis: Turnaround Progress Versus Valuation Reality
Baroda Extrusion presents a classic micro-cap turnaround narrative—a company emerging from years of losses and balance sheet stress, now demonstrating improved operational performance. The Q3 FY26 results validate this progress, with operating margins reaching multi-quarter highs and profitability showing consistent sequential improvement.
However, the investment case faces significant headwinds. The negative net worth of ₹19.70 crores limits financial flexibility and creates vulnerability to any operational setback. The historically weak ROCE of 1.79% indicates the business has struggled to generate adequate returns on deployed capital. Whilst recent quarters show improvement, sustainability remains unproven.
Most critically, current valuation provides minimal margin of safety. At 39 times trailing earnings and 9.5 times book value, the market has already priced in substantial future improvement. The stock trades at a significant premium to better-capitalised peers with superior ROE profiles. For value-conscious investors, this pricing leaves limited room for error.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Margin Recovery: Operating margins reached 6.79% in Q3 FY26, highest in recent quarters, demonstrating improved cost management
- Sequential Profit Growth: Net profit improved 69.60% QoQ and 140.91% YoY, showing operational momentum
- Debt Reduction: Long-term debt declined from ₹59.37 crores to ₹21.11 crores, indicating deleveraging efforts
- Strong Long-Term Growth: Five-year sales CAGR of 31.09% and EBIT growth of 45.76% reflect recovery trajectory
- Improved Cash Generation: Operating cash flow turned positive at ₹17.00 crores in FY25 from negative ₹5.00 crores in FY24
- No Promoter Pledging: Zero pledged shares indicate promoter confidence
- Positive Financial Trend: Quarterly trend classified as "POSITIVE" with improving metrics
⚠️ KEY CONCERNS
- Negative Net Worth: Shareholder funds of ₹-19.70 crores with book value per share of ₹-1.32 creates financial fragility
- Weak Historical ROCE: Average ROCE of just 1.79% indicates poor capital efficiency over time
- Valuation Premium: P/E of 39x and P/BV of 9.54x well above peers despite inferior ROE profile
- Earnings Volatility: Inconsistent margin performance across years raises sustainability questions
- Sector Underperformance: One-year return of 14.35% trails industrial products sector's 58.57% by 44 percentage points
- High Volatility: Beta of 1.50 and annualised volatility of 57.31% indicates significant price risk
- Micro-Cap Liquidity: Limited institutional holding (0%) and micro-cap status create liquidity constraints
Outlook: What to Watch in Coming Quarters
📈 POSITIVE CATALYSTS
- Sustained Margin Profile: Maintenance of 6%+ operating margins in Q4 FY26 would validate operational improvements
- Revenue Growth Acceleration: Top-line growth returning above 10% QoQ would indicate demand strength
- Balance Sheet Repair: Continued profitability moving net worth towards positive territory
- Working Capital Efficiency: Improved cash conversion cycles and reduced debtor days
- Capacity Utilisation: Higher throughput on existing 6,000 MT annual capacity without proportional cost increase
🚩 RED FLAGS TO MONITOR
- Margin Compression: Any decline back towards 2-3% operating margins would question turnaround sustainability
- Revenue Stagnation: Flat or declining sales for consecutive quarters would signal demand weakness
- Working Capital Pressure: Further increase in trade payables or inventory buildup straining cash flows
- Debt Creep: Any reversal in deleveraging trend or increase in borrowing costs
- Institutional Absence: Continued lack of institutional participation despite improved results
The next few quarters will prove critical in determining whether Baroda Extrusion's operational improvements represent a sustainable turnaround or a temporary margin recovery. Investors should closely monitor the company's ability to maintain operating margins above 6% whilst simultaneously growing revenues. The path to positive net worth restoration will require several years of consistent profitability, making near-term earnings quality paramount.
For existing shareholders who entered at lower levels, the recent rally has created an opportunity to reassess position sizing given elevated valuation multiples. Fresh investors face a challenging risk-reward proposition—whilst operational trends have improved, current pricing leaves limited margin of safety for a company still repairing its balance sheet and proving earnings sustainability.
The Verdict: Improved Operations Don't Justify Premium Valuation
Score: 57/100
For Fresh Investors: Not recommended for fresh investment at current valuations. Whilst Q3 FY26 results demonstrate genuine operational improvement, the stock's P/E of 39x and P/BV of 9.54x price in substantial future perfection. The negative net worth, historically weak ROCE, and micro-cap liquidity constraints create asymmetric downside risk. Wait for either a meaningful valuation correction (below 25x P/E) or several more quarters of sustained margin performance before considering entry.
For Existing Holders: Continue to hold with close monitoring of quarterly results. The operational turnaround is progressing, but the journey to full balance sheet repair remains long. Consider partial profit booking if the stock approaches ₹12-13 levels (near 52-week high) to lock in gains from the recovery rally. Maintain stop-loss discipline and reassess if operating margins fall below 5% or revenue growth turns negative.
Fair Value Estimate: ₹7.00-7.50 (27% downside from current levels), based on 25-28x P/E applied to normalised quarterly earnings of ₹1.50 crores, reflecting appropriate risk premium for balance sheet constraints and earnings volatility.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance does not guarantee future results. Investments in micro-cap stocks carry elevated risks including limited liquidity, high volatility, and potential for significant capital loss.
