The company's operating performance turned negative during the quarter, with operating profit margin (excluding other income) slipping to -0.40% compared to 5.28% in Q1 FY26 and 5.79% in the year-ago period. Net sales declined 25.52% quarter-on-quarter to ₹37.27 crores, reflecting typical seasonal weakness in the sports goods segment, whilst the year-on-year decline of 2.33% suggests underlying demand headwinds.
The company's shares closed at ₹238.00 on November 18, 2025, trading below all key moving averages and reflecting a bearish technical trend that emerged on November 17, 2025. With a proprietary Mojo Score of just 28 out of 100 and a "Strong Sell" rating, the stock faces significant headwinds from deteriorating financial trends and weak operational metrics.
Financial Performance: Seasonal Downturn Exposes Structural Weaknesses
The second quarter of FY26 proved particularly challenging for COSCO (India), as the company grappled with both seasonal demand weakness and operational inefficiencies. Net sales of ₹37.27 crores represented the lowest quarterly revenue in the recent eight-quarter period, declining 25.52% from Q1 FY26's ₹50.04 crores and falling 2.33% year-on-year from ₹38.16 crores in Q2 FY25.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Operating Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 37.27 | -25.52% | -0.40% | -1.43 | -3.84% |
| Jun'25 | 50.04 | +8.64% | 5.28% | 0.55 | 1.10% |
| Mar'25 | 46.06 | +12.75% | 0.37% | -1.31 | -2.84% |
| Dec'24 | 40.85 | +7.05% | 5.78% | 0.36 | 0.88% |
| Sep'24 | 38.16 | -20.96% | 5.79% | 0.20 | 0.52% |
| Jun'24 | 48.28 | -1.85% | 6.96% | 1.53 | 3.17% |
| Mar'24 | 49.19 | — | 5.79% | 0.85 | 1.73% |
More concerning than the revenue decline was the complete erosion of profitability. Operating profit before depreciation, interest, and tax (excluding other income) turned negative at ₹-0.15 crores, compared to a positive ₹2.64 crores in Q1 FY26 and ₹2.21 crores in Q2 FY25. This resulted in an operating margin of -0.40%, a dramatic reversal from the 5.28% achieved in the previous quarter and significantly below the 6.96% recorded in Jun'24, which represented the peak margin performance in recent quarters.
The profit-after-tax margin compressed to -3.84% from 1.10% in Q1 FY26, whilst the gross profit margin deteriorated to -3.14% from 3.18% in the preceding quarter. Interest costs remained elevated at ₹1.11 crores, consuming all operating profits and pushing the company into loss-making territory. The interest coverage ratio, measured by operating profit to interest, fell to a concerning -0.14 times, the lowest level in the recent period and indicative of the company's struggle to service its debt obligations from operations.
Critical Operating Metrics
Operating Profit to Interest: -0.14x (lowest in recent history)
Operating Margin Trend: Declined from 6.96% peak (Jun'24) to -0.40% (Sep'25)
Earnings Per Share (Q): ₹-3.44 (lowest recorded)
The company's inability to generate positive operating profits raises serious questions about business viability in the current operating environment.
Capital Efficiency Crisis: ROE Turns Negative
COSCO (India)'s return on equity (ROE) has deteriorated sharply to -3.70% in the latest period, down from an already weak average of 4.70% over the preceding years. This negative ROE indicates that the company is destroying shareholder value rather than creating it, with losses eroding the equity base. The return on capital employed (ROCE) stood at just 2.20% in the latest period, well below the average of 8.12% and far short of the cost of capital, suggesting inefficient deployment of resources.
The company's financial structure reveals significant leverage challenges. With an average debt-to-EBITDA ratio of 6.15 times and net debt-to-equity of 1.28 times, COSCO (India) carries a substantial debt burden relative to its earnings generation capacity. The high leverage magnifies the impact of operational setbacks, as evidenced by the company's inability to cover interest costs from operating profits in Q2 FY26. The average EBIT-to-interest coverage of just 1.37 times over recent periods underscores the precarious nature of the capital structure.
Sales-to-capital-employed averaged 1.59 times, indicating moderate asset turnover, but this metric provides little comfort when operating margins turn negative. The company's balance sheet quality has come under pressure, with working capital management challenges evident in the historical cash flow patterns. The five-year sales growth of 6.94% has been accompanied by a concerning five-year EBIT decline of 15.89%, highlighting a fundamental disconnect between top-line expansion and bottom-line performance.
Quality Assessment: Below Average
COSCO (India) has been classified as a "Below Average" quality company based on long-term financial performance. Whilst the company benefits from zero promoter pledging and stable 74.98% promoter holding, it suffers from weak profitability metrics, high leverage, and negative earnings trends. The absence of institutional holdings (0.0% FII and mutual fund participation) reflects the investment community's lack of confidence in the company's prospects.
Peer Comparison: Valuation Disconnect Persists
Within the diversified consumer products sector, COSCO (India) presents a mixed comparative picture. The company's price-to-book ratio of 2.00x exceeds most peers, despite generating a ROE of 4.70% that, whilst higher than several competitors, remains inadequate for the premium valuation. The company is currently loss-making on a trailing twelve-month basis, rendering traditional price-to-earnings comparisons meaningless.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity |
|---|---|---|---|---|
| COSCO (India) | NA (Loss Making) | 2.00 | 4.70 | 1.28 |
| Regency Ceramics | 87.59 | -2.10 | 0.00 | -1.28 |
| Zenith Exports | 44.75 | 1.40 | 0.73 | -0.26 |
| Pacific Industries | 23.44 | 0.26 | 2.66 | -0.09 |
| Tokyo Plast Intl | 90.81 | 1.87 | 0.96 | 0.58 |
| Elegant Marbles | 25.14 | 0.57 | 2.70 | -0.05 |
COSCO (India) ranks fifth by market capitalisation amongst its peer group at ₹99.00 crores, reflecting its micro-cap status. Whilst the company's ROE of 4.70% exceeds the peer average of approximately 1.00%, this relative strength is undermined by the recent deterioration to negative ROE levels and the higher debt-to-equity ratio of 1.28 times compared to most peers operating with negative or minimal leverage.
Valuation Analysis: Attractive Rating Masks Fundamental Concerns
Despite the challenging operational performance, COSCO (India)'s valuation grade stands at "Attractive", having oscillated between "Fair" and "Attractive" throughout October 2024. The current price of ₹238.00 represents a 39.59% decline from the 52-week high of ₹393.95 and trades 11.53% above the 52-week low of ₹213.40. However, the "attractive" valuation label must be viewed with considerable scepticism given the company's loss-making status and deteriorating financial trends.
The enterprise value-to-EBITDA multiple of 32.36 times and EV-to-EBIT of 65.51 times appear elevated, particularly when considering the negative operating trends. The EV-to-sales ratio of 0.93 times suggests the market is valuing the company at approximately one times revenue, which may seem reasonable in isolation but becomes concerning when margins turn negative. The price-to-book ratio of 2.00 times implies the market is willing to pay twice the accounting value for assets that are currently generating negative returns.
"With operating margins turning negative and ROE at -3.70%, the 'attractive' valuation grade appears to be a value trap rather than a genuine opportunity."
Shareholding Pattern: Stable but Uninspiring
The shareholding structure of COSCO (India) has remained remarkably stable over the past five quarters, with promoter holding steady at 74.98% and no sequential changes. The Navendu Investment Co. Pvt. Ltd. holds the largest stake at 35.42%, followed by individual promoter Pankaj Jain at 7.55%. The absence of promoter pledging is a positive indicator, suggesting confidence in the business despite operational challenges.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % |
|---|---|---|---|---|---|
| Sep'25 | 74.98 | 0.00 | 0.00 | 0.00 | 0.00 |
| Jun'25 | 74.98 | 0.00 | 0.00 | 0.00 | 0.00 |
| Mar'25 | 74.98 | 0.00 | 0.00 | 0.00 | 0.00 |
| Dec'24 | 74.98 | 0.00 | 0.00 | 0.00 | 0.00 |
| Sep'24 | 74.98 | 0.00 | 0.00 | 0.00 | 0.00 |
However, the complete absence of institutional participation—zero FII, mutual fund, insurance, and other DII holdings—is a significant red flag. Institutional investors typically conduct rigorous due diligence before committing capital, and their collective avoidance of COSCO (India) speaks volumes about the perceived investment merit. The non-institutional shareholding of 25.02% has also remained static, suggesting limited trading interest and poor liquidity in the stock.
Stock Performance: Severe Underperformance Across Timeframes
COSCO (India)'s stock performance has been dismal across most relevant timeframes, with the shares generating negative alpha versus the Sensex in nearly all periods. Over the past year, the stock declined 23.89% whilst the Sensex gained 9.48%, resulting in a negative alpha of 33.37 percentage points. The year-to-date performance shows an even steeper decline of 28.96% against the Sensex's 8.36% gain, widening the underperformance gap to 37.32 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.78% | 0.96% | -3.74% |
| 1 Month | 3.03% | 0.86% | +2.17% |
| 3 Month | 1.13% | 4.18% | -3.05% |
| 6 Month | -12.50% | 2.85% | -15.35% |
| YTD | -28.96% | 8.36% | -37.32% |
| 1 Year | -23.89% | 9.48% | -33.37% |
| 2 Years | 7.77% | 28.69% | -20.92% |
| 3 Years | 27.79% | 37.31% | -9.52% |
The stock's risk-adjusted returns paint an even grimmer picture. With an absolute return of -23.89% over the past year and volatility of 49.65%, the risk-adjusted return stands at -0.48, indicating investors have been rewarded with losses for assuming high risk. The beta of 1.50 classifies COSCO (India) as a high-beta stock, meaning it is 50% more volatile than the broader market, amplifying losses during downturns without commensurate gains during rallies.
Technical indicators uniformly point to weakness. The stock trades below all major moving averages—5-day (₹241.34), 20-day (₹240.32), 50-day (₹239.88), 100-day (₹241.73), and 200-day (₹251.12)—signalling a bearish trend that emerged on November 17, 2025. The MACD shows mildly bullish signals on the weekly chart but bearish on monthly, whilst RSI remains in no-signal territory. The stock has underperformed its sector by 37.12 percentage points over the past year, with the diversified consumer products sector returning 13.23% compared to COSCO's -23.89% decline.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
The investment case for COSCO (India) is severely compromised by multiple fundamental and technical weaknesses. The company's financial trend has been classified as "Negative" since September 2025, with key metrics including PAT, operating profit-to-interest coverage, net sales, PBDIT, operating margin, and earnings per share all hitting multi-quarter lows. The bearish technical trend compounds these concerns, with the stock failing to find support at any major moving average level.
Key Strengths
- Stable promoter holding at 74.98% with zero pledging demonstrates management commitment
- Established presence in sports goods manufacturing with diversified product portfolio
- Five-year returns of 189.36% show historical wealth creation capability
- Manufacturing facility in Gurugram provides operational base
- Part of the Enkay Rubber Group with potential for synergies
Key Concerns
- Operating margins turned negative at -0.40% in Q2 FY26, worst in recent history
- ROE deteriorated to -3.70%, indicating value destruction
- High leverage with debt-to-EBITDA of 6.15x and net debt-to-equity of 1.28x
- Interest coverage ratio of -0.14x shows inability to service debt from operations
- Zero institutional participation signals lack of investment community confidence
- Severe stock underperformance with -23.89% return versus sector's +13.23%
- High volatility (49.65%) with negative risk-adjusted returns
Outlook: What Lies Ahead
The path forward for COSCO (India) requires significant operational improvements and margin recovery to restore investor confidence. The company must address its cost structure to return to positive operating margins, particularly during seasonally weak quarters. Management's ability to navigate demand challenges whilst managing the debt burden will be critical to avoiding further value erosion.
Positive Catalysts to Monitor
- Return to positive operating margins in Q3/Q4 FY26
- Successful debt reduction initiatives to improve financial flexibility
- Entry of institutional investors signalling confidence restoration
- Market share gains in core sports goods categories
- Cost optimisation measures improving profitability
Red Flags to Watch
- Continued negative operating margins in upcoming quarters
- Further deterioration in interest coverage below current levels
- Breach of debt covenants or refinancing challenges
- Promoter stake dilution or emergence of pledging
- Loss of market share to better-capitalised competitors
The Verdict: Avoid Until Turnaround Evidence Emerges
Score: 28/100
For Fresh Investors: Avoid initiating positions. The combination of negative operating margins, deteriorating ROE, high leverage, and bearish technical trends creates an unfavourable risk-reward profile. Wait for concrete evidence of operational turnaround with at least two consecutive quarters of positive operating profits before considering entry.
For Existing Holders: Consider exiting positions to preserve capital. The fundamental deterioration from operating profits to losses, coupled with structural leverage concerns and absence of institutional support, suggests the path to recovery will be prolonged and uncertain. The 39.59% decline from 52-week highs may extend further if operational metrics fail to improve.
Fair Value Estimate: Given the loss-making status and negative financial trends, traditional valuation methods are unreliable. Current price of ₹238.00 may find support near the 52-week low of ₹213.40, but further downside risk exists if Q3 FY26 results fail to show margin recovery.
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.
