Chartered Logistics Q2 FY26: Profitability Plunge Raises Serious Concerns

The quarter's results paint a troubling picture of operational stress. Revenue declined 8.81% sequentially to ₹17.39 crores, marking the lowest quarterly sales figure in recent periods. More alarmingly, the company's operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) turned negative at ₹-0.01 crores, a stark reversal from Q1 FY26's ₹1.20 crores. This represents an operating margin collapse from 6.29% to -0.06%, signalling fundamental execution challenges beyond normal business volatility.

The company's dependence on other income became starkly evident during the quarter. Other income contributed ₹1.42 crores, effectively preventing what would have been a quarterly loss. Without this non-operating buffer, the company's core logistics operations would have posted negative profitability. This reliance on non-core income sources raises questions about the sustainability of earnings quality and the underlying health of the transport services business.

Financial Performance: Margin Compression and Profitability Crisis

Chartered Logistics' Q2 FY26 financial performance reveals a company struggling with both top-line momentum and bottom-line efficiency. Net sales of ₹17.39 crores represent not only an 8.81% sequential decline but also the lowest quarterly revenue figure in the recent seven-quarter dataset. On a year-on-year basis, revenue grew 7.61% from ₹16.16 crores in September 2024, providing limited comfort given the sharp sequential deterioration.

The margin structure has collapsed dramatically. Operating profit excluding other income turned negative at ₹-0.01 crores, yielding a -0.06% operating margin compared to 6.29% in the previous quarter. This represents a margin compression of 635 basis points quarter-on-quarter, indicating severe operational stress. The gross profit margin fell to 4.83% from 14.00% in Q1 FY26, whilst PAT margin contracted from 10.59% to 1.96%.

Employee costs remained relatively stable at ₹0.39 crores, suggesting the margin pressure stems from other operational factors rather than wage inflation. Interest costs held steady at ₹0.57 crores, maintaining consistency with the previous quarter. Depreciation charges remained flat at ₹0.40 crores. The tax rate for Q2 FY26 stood at 22.73%, significantly higher than Q1 FY26's 10.62%, further pressuring net profitability.

For the half-year period H1 FY26 (April to September 2025), the company reported combined revenues of ₹36.46 crores and net profit of ₹2.36 crores, yielding a half-yearly PAT margin of 6.47%. Whilst this appears reasonable in isolation, the sharp Q2 deterioration suggests the H1 performance was heavily front-loaded by Q1's stronger showing.

Operational Challenges: Weak Returns and High Leverage

The company's operational efficiency metrics paint a concerning picture of capital productivity. Average return on equity (ROE) stands at a weak 1.88%, well below industry standards and indicating poor returns for shareholders. The latest ROE figure of 3.22% shows marginal improvement but remains deeply inadequate for a company operating in the capital-intensive transport services sector.

Return on capital employed (ROCE) averaged 2.84% over recent periods, with the latest reading at a paltry 0.45%. These anaemic returns suggest the company is destroying value rather than creating it, with capital deployed generating returns below the cost of capital. For context, healthy logistics companies typically generate ROCE in the 12-18% range.

The balance sheet reveals mounting leverage concerns. Long-term debt increased substantially to ₹7.60 crores in March 2025 from ₹2.06 crores in March 2024, representing a near-quadrupling of long-term borrowings. The debt-to-EBITDA ratio averaged a concerning 8.77 times, indicating the company would need nearly nine years of current EBITDA to repay its debt burden. This elevated leverage amplifies financial risk, particularly given the weak profitability trajectory.

Net debt to equity averaged 0.30, which appears moderate in isolation but becomes concerning when viewed alongside the weak cash generation. The EBIT-to-interest coverage ratio averaged just 0.60 times, meaning operating profits barely cover half of interest obligations. This leaves virtually no margin for error and raises questions about debt serviceability if operating performance deteriorates further.

Structural Headwinds: Negative Long-Term Growth Trajectory

Beyond the quarterly volatility, Chartered Logistics faces deeper structural challenges evidenced by negative long-term growth trends. Five-year sales growth stands at -9.90%, indicating the company has been shrinking rather than expanding its revenue base over the medium term. More concerningly, five-year EBIT growth registered at -28.66%, showing operating profitability has deteriorated at an even faster pace than revenues.

This negative growth trajectory places Chartered Logistics in a precarious competitive position within India's transport services sector. Whilst the broader logistics industry has benefited from e-commerce expansion and manufacturing growth, the company appears unable to capture these tailwinds. The shrinking revenue base combined with margin compression suggests either loss of market share, customer attrition, or inability to compete effectively on pricing and service quality.

Sales to capital employed averaged 1.12 times, indicating relatively low asset turnover. This suggests the company requires significant capital investment to generate each rupee of revenue, limiting operational flexibility and returns. For a logistics business, where asset-light models typically generate superior returns, this capital intensity represents a structural disadvantage.

Industry Context: Underperformance Relative to Peers

Within India's transport services sector, Chartered Logistics occupies a weak competitive position characterised by inferior profitability metrics and elevated valuation multiples. The company's average ROE of 1.88% significantly trails peer averages, with competitors like Flomic Global achieving 13.81% and Orissa Bengal Transport delivering 5.18%. This profitability gap reflects either operational inefficiencies, adverse business mix, or structural cost disadvantages.

The sector has faced headwinds over the past year, with the transport services index declining 9.27%. Chartered Logistics underperformed even this weak benchmark, posting a one-year return of -21.91%, representing 12.64 percentage points of underperformance versus the sector. This relative weakness suggests company-specific challenges beyond broader industry trends.

Despite weak fundamentals, the stock trades at a P/E ratio of 52.03 times trailing twelve-month earnings, substantially above the industry average P/E of 32 times. This valuation premium appears unjustified given the negative growth trajectory, weak returns on capital, and deteriorating quarterly performance. Peer companies with stronger fundamentals trade at more reasonable multiples, with Sanco Trans at 27.59 times and Total Transport at just 7.92 times.

Valuation Analysis: Premium Valuation Despite Weak Fundamentals

Chartered Logistics' current valuation presents a paradox: the stock trades at premium multiples despite deteriorating fundamentals and negative growth. At ₹8.84 per share, the company commands a market capitalisation of ₹116.00 crores and a P/E ratio of 52.03 times, nearly double the transport services industry average of 32 times. This elevated multiple appears disconnected from underlying business reality.

The price-to-book value ratio of 1.67 times seems reasonable on the surface, but becomes less attractive when considering the weak ROE of 1.88%. A company generating sub-2% returns on equity should theoretically trade below book value, not at a 67% premium. The disconnect suggests either market inefficiency or unrealistic growth expectations embedded in the current price.

Enterprise value multiples paint an even more concerning picture. EV/EBITDA stands at 73.19 times, whilst EV/EBIT reaches an astronomical 132.48 times. These extreme multiples reflect the company's minimal operating profitability relative to its enterprise value. For context, healthy logistics companies typically trade at EV/EBITDA multiples of 8-12 times, making Chartered Logistics' valuation appear stretched by a factor of six to nine times.

The stock's valuation grade has fluctuated between "Attractive" and "Very Attractive" in recent months, currently settling at "Attractive." However, this assessment appears overly generous given the fundamental deterioration. The lack of dividend yield (last dividend paid in October 2011) eliminates any income component to total returns, forcing investors to rely entirely on capital appreciation that seems unlikely given current trends.

Shareholding Pattern: Promoter Reduction Raises Questions

Recent shareholding pattern changes reveal noteworthy shifts in ownership structure that merit investor attention. Promoter holding declined from 37.07% in September 2025 to 35.06% in November 2025, representing a 2.01 percentage point reduction. This stake sale occurred during a period of operational stress, potentially signalling reduced promoter confidence in near-term prospects.

The reduction in promoter holding was mirrored by a corresponding increase in non-institutional shareholding, which rose from 62.93% to 64.94% over the same period. This shift towards retail and non-institutional investors could increase stock price volatility and reduce the quality of the shareholder base, as retail investors typically exhibit shorter investment horizons and higher trading frequency.

Notably, the company has zero institutional ownership, with no holdings from foreign institutional investors (FIIs), mutual funds, insurance companies, or other domestic institutional investors (DIIs). This complete absence of institutional participation represents a significant red flag, as professional investors have evidently chosen to avoid the stock despite its "attractive" valuation grade.

Positively, there is no promoter pledging of shares, eliminating one potential source of corporate governance concern. However, the declining promoter stake and complete absence of institutional investors suggest a shareholder base lacking conviction in the company's turnaround prospects.

Stock Performance: Significant Underperformance Across Timeframes

Chartered Logistics' stock price performance reveals a pattern of significant underperformance relative to broader market indices across most meaningful timeframes. Over the past year, the stock has declined 21.91% whilst the Sensex gained 9.01%, resulting in negative alpha of 30.92 percentage points. This substantial underperformance reflects deteriorating fundamentals and diminishing investor confidence.

The underperformance extends across multiple timeframes. Over six months, the stock gained just 1.61% compared to the Sensex's 5.53% advance, yielding negative alpha of 3.92 percentage points. Year-to-date performance shows the stock up 18.82% against the Sensex's 1.11% decline, representing one of the few periods of outperformance, though this likely reflects recovery from oversold levels rather than fundamental improvement.

Near-term momentum has turned negative, with the stock declining 3.39% on February 10, 2026, whilst the Sensex gained 0.25%. Over the past week, the stock rose 2.43% versus the Sensex's 0.64% gain, and over one month advanced 10.50% against the benchmark's 0.83% rise. These short-term gains appear to be technical bounces rather than trend reversals, given the weak quarterly results.

The stock's technical indicators paint a bearish picture. The current trend classification is "Mildly Bearish," having changed from "Bearish" on January 27, 2026. The stock trades above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, suggesting short-term momentum, though this positioning appears vulnerable given fundamental deterioration.

With a beta of 1.13, the stock exhibits higher volatility than the broader market, amplifying both gains and losses. Volatility stands at 56.17% compared to the Sensex's 11.54%, placing Chartered Logistics in the "High Risk Low Return" category based on one-year risk-adjusted returns. The risk-adjusted return of -0.39 compares unfavourably to the Sensex's 0.78, indicating investors are being poorly compensated for the elevated risk.

Investment Thesis: Multiple Red Flags Outweigh Valuation Appeal

The investment case for Chartered Logistics is severely compromised by a confluence of negative factors spanning financial performance, operational efficiency, and growth trajectory. Whilst the stock's valuation grade of "Attractive" and overall score of 28/100 might suggest some merit, a deeper analysis reveals fundamental weaknesses that outweigh any valuation appeal.

The company's quality grade of "Below Average" accurately reflects its long-term financial performance characterised by negative 5-year sales growth of -9.90% and even worse EBIT growth of -28.66%. These figures indicate a business in structural decline rather than temporary difficulty. The average ROCE of 2.84% and ROE of 1.88% demonstrate value destruction, with returns well below the cost of capital.

The financial trend classification of "Negative" captures the deteriorating quarterly performance. Q2 FY26 results showed the lowest quarterly revenue at ₹17.39 crores and profit before tax excluding other income at ₹-1.74 crores, representing the weakest performance in recent periods. The heavy dependence on other income to avoid losses raises serious questions about core business viability.

Technical indicators remain "Mildly Bearish," reflecting market scepticism despite recent short-term bounces. The combination of negative financial trends and bearish technicals creates a challenging environment for near-term capital appreciation. The stock's underperformance of 30.92 percentage points versus the Sensex over the past year demonstrates the market's recognition of these fundamental challenges.

Key Strengths & Risk Factors

Outlook: Critical Monitoring Points for Any Recovery

For Chartered Logistics to stage a meaningful turnaround, several critical improvements must materialise over coming quarters. Investors should closely monitor specific operational and financial metrics that would signal genuine recovery versus temporary volatility.

The path to recovery appears steep given the structural nature of challenges. The company requires not just cyclical improvement but fundamental business model transformation to generate acceptable returns on capital. Without clear signs of operating leverage improvement, margin expansion, and revenue growth, the investment case remains weak despite attractive valuation labels.