The micro-cap logistics player, with a market capitalisation of just ₹15.00 crores and trading at ₹35.00 per share as of February 11, 2026, presents a mixed picture of operational recovery tempered by stagnant top-line growth. Whilst the company managed to improve profitability margins significantly—PAT margin expanded from 0.20% in Q2 FY26 to 6.23% in Q3 FY26—the inability to grow revenue raises concerns about the sustainability of this profit improvement and the company's competitive positioning in India's fragmented transport services sector.
Following the quarterly results, the stock gained 4.01% in a single day, closing at ₹35.00 from the previous close of ₹33.65, suggesting some investor optimism about the profitability turnaround. However, the stock remains 18.40% below its 52-week high of ₹42.89 and continues to trade significantly below its 20-day, 50-day, and 100-day moving averages, indicating a broader downtrend that the latest results have only partially arrested.
| Quarter | Revenue (₹ Cr) | QoQ % | YoY % | Net Profit (₹ Cr) | PAT Margin % |
|---|---|---|---|---|---|
| Dec'25 | 10.27 | +0.20% | -2.00% | 0.64 | 6.23% |
| Sep'25 | 10.25 | -0.97% | +1.69% | 0.02 | 0.20% |
| Jun'25 | 10.35 | -3.18% | +6.15% | 0.86 | 8.31% |
| Mar'25 | 10.69 | +2.00% | — | 0.05 | 0.47% |
| Dec'24 | 10.48 | +3.97% | — | 0.44 | 4.20% |
| Sep'24 | 10.08 | +3.38% | — | 0.54 | 5.36% |
| Jun'24 | 9.75 | — | — | 0.79 | 8.10% |
Financial Performance: Margin Recovery Masks Revenue Stagnation
Coastal Roadways' Q3 FY26 financial performance reveals a company struggling with top-line growth whilst managing to extract improved profitability from a stagnant revenue base. Net sales of ₹10.27 crores in Q3 FY26 represent minimal sequential growth of 0.20% from Q2 FY26's ₹10.25 crores, and more concerningly, a 2.00% year-on-year decline from Q3 FY25's ₹10.48 crores. This revenue trajectory suggests the company is losing market share or facing pricing pressures in its core transport services business.
The dramatic improvement in net profit—from ₹0.02 crores in Q2 FY26 to ₹0.64 crores in Q3 FY26—was primarily driven by two factors: a sharp expansion in operating margins and a significant swing in other income. Operating profit (PBDIT) excluding other income improved to ₹0.85 crores from ₹0.64 crores, with operating margins expanding from 6.24% to 8.28%. This 204 basis point margin improvement suggests better cost management and operational efficiency, particularly as employee costs declined from ₹0.62 crores to ₹0.54 crores quarter-on-quarter.
However, the quality of earnings improvement warrants scrutiny. Other income swung dramatically from a negative ₹0.22 crores in Q2 FY26 to a positive ₹0.35 crores in Q3 FY26—a ₹0.57 crore swing that contributed significantly to the profit recovery. This volatility in other income, coupled with an unusually low tax rate of 23.81% in Q3 FY26 (compared to 80.00% in Q2 FY26), raises questions about the sustainability and quality of the reported profit improvement.
Looking at the nine-month performance for FY26 (April to December 2025), Coastal Roadways has generated revenue of ₹30.87 crores with net profit of ₹1.52 crores, translating to a nine-month PAT margin of 4.92%. This compares to the full-year FY25 revenue of ₹40.00 crores and net profit of ₹1.00 crore, suggesting the company is on track for modest profit growth despite revenue headwinds.
Quality of Earnings Concern
The sharp swing in other income from negative ₹0.22 crores in Q2 FY26 to positive ₹0.35 crores in Q3 FY26 contributed significantly to the profit recovery. This volatility, combined with fluctuating tax rates (80.00% in Q2 vs 23.81% in Q3), raises questions about earnings sustainability. Operating profit margins, whilst improving, remain modest at 8.28%, and the company's inability to grow revenue year-on-year suggests fundamental challenges in its core business that margin improvements alone cannot address.
Operational Challenges: Weak Capital Efficiency and Return Metrics
Beneath the surface-level profit recovery, Coastal Roadways continues to grapple with fundamental operational weaknesses that limit its investment appeal. The company's average return on equity (ROE) stands at an anaemic 0.00% over the past five years, indicating virtually no value creation for shareholders from retained earnings. Even the latest ROE of 5.64% for FY25, whilst an improvement, remains well below industry standards and suggests the company struggles to generate meaningful returns from its equity capital base of ₹23.40 crores.
Return on capital employed (ROCE) tells a similar story. The average ROCE of 4.73% over five years is weak by any standard, barely covering the cost of capital. The latest ROCE of 10.06% for FY25 shows improvement but remains modest for a capital-intensive transport business. With sales to capital employed averaging just 2.26 times, the company demonstrates low asset turnover, suggesting either underutilised capacity or an inefficient asset base.
The company's balance sheet, whilst relatively healthy with minimal debt (long-term debt of zero as of March 2025), reveals limited financial leverage to amplify returns. Total shareholder funds stood at ₹23.40 crores as of March 2025, with fixed assets of ₹7.56 crores and investments of ₹6.23 crores. The debt-free status is positive from a risk perspective, but the company's inability to generate strong returns even without the burden of interest costs raises questions about management's capital allocation capabilities.
Five-Year Growth Trajectory
Coastal Roadways has delivered sales growth of just 5.79% annually over the past five years, well below the logistics sector's growth rate and India's nominal GDP growth. More encouragingly, EBIT has grown at 27.66% annually over the same period, suggesting improving operational efficiency. However, this EBIT growth has not translated into proportionate shareholder value creation, as evidenced by the near-zero average ROE, indicating either poor capital allocation or one-off gains that distort the growth metrics.
Industry Context: Struggling in a Fragmented but Growing Market
India's transport services sector has witnessed robust growth over the past decade, driven by infrastructure development, e-commerce expansion, and manufacturing activity. However, the sector remains highly fragmented with intense competition from both organised players and a vast unorganised segment. Coastal Roadways, as a micro-cap player with a fleet capacity exceeding 4,000 tonnes and a network of 6 zonal offices and 69 branches, operates in the heavy and oversized cargo niche—a segment that should theoretically offer better pricing power and margins.
Yet, the company's stagnant revenue growth suggests it is losing ground to competitors or facing structural headwinds. The 2.00% year-on-year revenue decline in Q3 FY26 is particularly concerning given that India's logistics sector has been growing in the high single digits. This underperformance could stem from several factors: loss of key clients, pricing pressures from larger organised players, increased competition from new entrants, or operational inefficiencies that limit the company's ability to scale.
The company's one-year stock return of 8.36% compares favourably to the Transport Services sector's negative 7.03% return, suggesting relative outperformance. However, this outperformance is from a low base, and the stock has significantly underperformed the Sensex's 10.40% return over the same period. Over longer timeframes, the stock's performance has been mixed—strong gains over 4-5 years (86.17% and 134.74% respectively) but significant underperformance over 2-3 years and the past decade.
| Company | P/E (TTM) | Price/Book | Debt/Equity | Market Cap (₹ Cr) |
|---|---|---|---|---|
| Coastal Roadways | 10.18 | 0.57 | 0.00 | 15.00 |
| BLT Logistics | 6.33 | 1.12 | 1.01 | — |
| Inter State Oil | 13.26 | 0.86 | 1.42 | — |
| PDP Shipping | 8.02 | 0.85 | -0.02 | — |
| Frontline Corp. | 5.72 | 0.94 | 3.19 | — |
Valuation Analysis: Attractive Multiples but Justified by Weak Fundamentals
At a current price of ₹35.00, Coastal Roadways trades at a P/E (TTM) ratio of 10.18x, significantly below the transport services industry average of 32x. The stock also trades at just 0.57x book value, representing a 43% discount to its book value per share of ₹56.42. On the surface, these multiples appear attractive, suggesting the stock is undervalued relative to both its asset base and earnings power.
However, the valuation discount is largely justified by the company's weak fundamentals. With an average ROE of 0.00% and latest ROE of just 5.64%, the company trades below book value because it fails to generate returns above its cost of equity. The P/E ratio of 10.18x, whilst low in absolute terms, may not represent value when considering the company's negligible sales growth, volatile earnings, and poor capital efficiency metrics.
The company's EV/EBITDA multiple of 2.59x appears attractive compared to typical transport sector valuations, but this must be viewed in the context of the company's micro-cap status, limited liquidity, and operational challenges. The EV/Sales ratio of 0.20x reflects the market's scepticism about the company's ability to convert revenue into sustainable profits and cash flows.
The company's valuation grade has fluctuated between "Attractive" and "Risky" over the past several months, most recently moving to "Attractive" on October 29, 2025. This volatility in valuation assessment reflects the market's uncertainty about the company's earnings sustainability and growth prospects. The absence of dividend payments (last dividend of ₹0.90 per share was in July 2012) further reduces the stock's appeal for income-seeking investors.
Shareholding Pattern: Stable Promoter Base with Minimal Institutional Interest
Coastal Roadways' shareholding structure has remained remarkably stable over the past five quarters, with promoter holding steady at 74.99% and no changes in any shareholder category. The Todi family, through various entities including Coastal Agro Tech (India) Pvt. Ltd. (14.75%), Todi Services Limited (8.72%), and individual holdings, maintains firm control over the company. Importantly, there is no promoter pledging, eliminating concerns about financial stress or forced selling by controlling shareholders.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % |
|---|---|---|---|---|---|
| Dec'25 | 74.99 | 0.00 | 0.01 | 0.00 | 0.01 |
| Sep'25 | 74.99 | 0.00 | 0.01 | 0.00 | 0.01 |
| Jun'25 | 74.99 | 0.00 | 0.01 | 0.00 | 0.01 |
| Mar'25 | 74.99 | 0.00 | 0.01 | 0.00 | 0.01 |
| Dec'24 | 74.99 | 0.00 | 0.01 | 0.00 | 0.01 |
However, the near-total absence of institutional interest is a significant red flag. Foreign institutional investors (FIIs) have zero holdings, whilst mutual funds and other domestic institutional investors (DIIs) hold a negligible 0.02% combined. This lack of institutional participation suggests sophisticated investors see limited value or growth potential in the stock, or find the company's small size and limited liquidity unattractive. The non-institutional shareholding of 24.99% represents largely retail investors who may lack the resources for deep fundamental analysis.
The stable shareholding pattern, whilst providing governance stability, also suggests limited interest from new investors and no meaningful accumulation by informed market participants. In a truly attractive turnaround situation, one would expect to see gradual institutional accumulation or at least some change in the non-institutional shareholding pattern—neither of which is evident here.
Stock Performance: Short-Term Gains Mask Longer-Term Underperformance
Coastal Roadways' stock has delivered mixed performance across different timeframes, reflecting the company's volatile fundamentals and market sentiment swings. Over the past year, the stock has returned 8.36%, modestly underperforming the Sensex's 10.40% return by 2.04 percentage points. However, this one-year return significantly outperformed the Transport Services sector's negative 7.03% return, suggesting some relative strength within a weak sector.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | +4.01% | -0.05% | +4.06% |
| 1 Week | +4.01% | +0.49% | +3.52% |
| 1 Month | +9.00% | +0.78% | +8.22% |
| 3 Months | -6.54% | +0.43% | -6.97% |
| 6 Months | -7.89% | +4.50% | -12.39% |
| YTD | +14.01% | -1.16% | +15.17% |
| 1 Year | +8.36% | +10.40% | -2.04% |
| 2 Years | -17.67% | +17.65% | -35.32% |
| 3 Years | +14.57% | +38.81% | -24.24% |
The short-term performance has been more encouraging, with the stock gaining 14.01% year-to-date and 9.00% over the past month, generating significant positive alpha against the Sensex. The 4.01% single-day gain following the Q3 results announcement suggests some market optimism about the profitability recovery. However, over three-month and six-month periods, the stock has declined 6.54% and 7.89% respectively, underperforming the broader market significantly.
Longer-term performance reveals a concerning pattern. Over two years, the stock has lost 17.67% whilst the Sensex gained 17.65%—a negative alpha of 35.32 percentage points. Over three years, the stock's 14.57% return badly trails the Sensex's 38.81% gain. Only over 4-5 year periods does the stock show strong absolute returns (86.17% and 134.74%), but even these gains lag the market when considering the higher risk profile.
The stock's beta of 1.50 indicates high volatility—it tends to move 50% more than the market in either direction. With a volatility of 67.67% (versus 11.52% for the Sensex), the stock carries substantially higher risk. The risk-adjusted return of 0.12 over one year, whilst positive, is far below the Sensex's 0.90, indicating poor risk-reward characteristics. The stock is classified as "High Risk Medium Return," an unfavourable combination for most investors.
Investment Thesis: Attractive Valuation Insufficient to Offset Fundamental Weaknesses
Coastal Roadways presents a complex investment case where surface-level valuation metrics suggest opportunity, but deeper fundamental analysis reveals significant concerns. The company's proprietary Mojo Score of 32 out of 100 and "SELL" rating reflect these fundamental weaknesses, despite the stock's "Attractive" valuation grade. The investment thesis hinges on four key parameters, each telling a different part of the story.
The "Attractive" valuation grade stems from the stock trading at 10.18x P/E and 0.57x book value—multiples that appear cheap in absolute terms and relative to the sector. However, this valuation discount exists for good reason: the company's "Below Average" quality grade reflects poor return metrics (0.00% average ROE), weak capital efficiency, and minimal institutional interest. The "Flat" financial trend captures the stagnant revenue growth and volatile profitability that characterise recent performance.
Most concerning is the technical picture, where the stock "Does Not Qualify" for a positive trend assessment. Trading below all key moving averages (5-day, 20-day, 50-day), the stock shows no technical support for a sustained recovery. The high beta of 1.50 and extreme volatility of 67.67% make this unsuitable for risk-averse investors, whilst the lack of dividend income removes a key downside cushion.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Debt-Free Balance Sheet: Zero long-term debt provides financial flexibility and eliminates interest burden, with debt-to-equity of 0.00 and minimal leverage risk.
- Attractive Valuation Multiples: Trading at 10.18x P/E (vs industry 32x) and 0.57x book value represents significant discount to both earnings and asset value.
- Improving Operating Margins: Q3 FY26 operating margin of 8.28% up from 6.24% in Q2 FY26 demonstrates cost management capabilities and operational leverage.
- Stable Promoter Holding: 74.99% promoter stake with zero pledging indicates strong promoter commitment and eliminates governance concerns related to pledged shares.
- Niche Market Position: Focus on heavy and oversized cargo transportation provides specialisation that could offer pricing power in specific segments.
- Established Network: 6 zonal offices and 69 branches across India provide geographic coverage and potential for scale economies if utilised effectively.
- Recent Profitability Recovery: Net profit surge to ₹0.64 crores in Q3 FY26 from ₹0.02 crores in Q2 FY26 shows potential for margin improvement.
KEY CONCERNS ⚠
- Revenue Stagnation: 2.00% YoY revenue decline in Q3 FY26 and flat QoQ growth indicate loss of market share or structural demand challenges in core business.
- Weak Return Metrics: Average ROE of 0.00% over five years and latest ROE of just 5.64% demonstrate poor capital efficiency and value destruction for shareholders.
- Volatile Earnings Quality: Sharp swings in other income (₹0.57 crore swing from Q2 to Q3) and tax rates (80% to 23.81%) raise concerns about earnings sustainability.
- Zero Institutional Interest: FII holding of 0.00% and combined institutional holding of just 0.02% suggests sophisticated investors see limited value or growth potential.
- High Volatility: Beta of 1.50 and volatility of 67.67% make the stock unsuitable for risk-averse investors, with poor risk-adjusted returns of 0.12.
- Micro-Cap Liquidity: Market cap of just ₹15.00 crores limits liquidity, with daily volumes of just 600 shares creating significant execution risk.
- No Dividend Income: Last dividend in July 2012 eliminates income cushion, with 0.0% dividend payout ratio indicating no shareholder returns via distributions.
- Below Average Quality Grade: Overall quality assessment of "Below Average" reflects weak fundamentals across multiple parameters including growth, profitability, and efficiency.
Outlook: What to Watch in Coming Quarters
POSITIVE CATALYSTS 📈
- Revenue Growth Recovery: Any quarter showing consistent YoY revenue growth above 5% would signal market share gains and improved competitive positioning.
- Sustained Margin Improvement: Operating margins consistently above 8% for multiple quarters would validate operational improvements and pricing power.
- Institutional Accumulation: Entry of mutual funds or FIIs would signal professional validation of turnaround thesis and improve liquidity.
- ROE Expansion: Quarterly ROE consistently above 10% would indicate improving capital efficiency and value creation for shareholders.
- Strategic Initiatives: Announcements of fleet expansion, technology adoption, or new client wins in high-margin segments could drive re-rating.
RED FLAGS 🚩
- Continued Revenue Decline: Further YoY revenue declines would confirm structural challenges and loss of competitive positioning in core markets.
- Margin Compression: Operating margins falling below 6% would indicate pricing pressures or cost inflation that management cannot control.
- Earnings Volatility: Continued large swings in other income or unusual tax rates would raise concerns about earnings quality and sustainability.
- Promoter Pledging: Any pledging of promoter shares (currently 0%) would signal financial stress and raise governance concerns.
- Institutional Exits: Even the minimal mutual fund holding (0.01%) exiting would remove last vestige of institutional validation.
The Verdict: Attractive Valuation Insufficient to Overcome Fundamental Weaknesses
Score: 32/100
For Fresh Investors: Avoid initiating positions despite attractive valuation multiples. The combination of stagnant revenue growth, near-zero return on equity, volatile earnings quality, and complete absence of institutional interest creates an unfavourable risk-reward profile. The stock's high volatility (beta 1.50) and micro-cap liquidity constraints add execution risk that the low valuation multiples do not adequately compensate for. Wait for sustained evidence of revenue growth recovery and margin stability before considering entry.
For Existing Holders: Consider reducing positions or exiting on any rally towards ₹40-42 levels. Whilst Q3 FY26's profitability recovery is encouraging, the underlying revenue stagnation and weak return metrics suggest limited upside potential. The stock's inability to attract institutional interest despite trading at 0.57x book value is a significant red flag. Use any strength to exit rather than averaging down on weakness.
Fair Value Estimate: ₹32-35 (0-9% downside from current levels). The current price of ₹35.00 appears fairly valued given the company's weak fundamentals, despite surface-level valuation metrics appearing cheap. Significant upside would require sustained revenue growth acceleration and ROE improvement above 10%, neither of which appears imminent based on current trends.
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 is not indicative of future results. The author and publisher are not responsible for any investment decisions made based on the information provided in this article.
