The results underscore a troubling pattern: this marks the third consecutive quarter of losses, with revenue contracting 24.19% quarter-on-quarter to ₹19.18 crores—the lowest quarterly sales figure in recent periods. Operating margins collapsed to a mere 2.50%, down from 4.47% in Q2 FY26, whilst interest costs remained elevated at ₹1.18 crores, consuming any residual operational profitability. The stock has plummeted 47.18% over the past year, vastly underperforming the Sensex's 10.33% gain and trailing the industrial manufacturing sector by 51.64 percentage points.
The deterioration in Cosmo Ferrites' financial health reflects a confluence of operational challenges, elevated debt servicing costs, and weak demand dynamics in the ferrite manufacturing space. With the company now loss-making on a trailing twelve-month basis, traditional valuation metrics such as P/E ratio have become meaningless, forcing investors to assess the business through the lens of distressed asset recovery rather than growth potential.
| Quarter | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 | Jun'24 |
|---|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 19.18 | 25.30 | 26.92 | 19.48 | 22.61 | 21.20 | 22.37 |
| QoQ Growth | -24.19% | -6.02% | +38.19% | -13.84% | +6.65% | -5.23% | — |
| YoY Growth | -15.17% | +19.34% | +20.34% | — | — | — | — |
| Net Profit (₹ Cr) | -1.32 | -0.57 | 0.05 | -1.55 | -0.45 | -1.97 | -1.69 |
| Operating Margin (%) | 2.50% | 4.47% | 8.66% | -0.26% | 5.88% | 2.55% | 1.83% |
| PAT Margin (%) | -6.88% | -2.25% | 0.19% | -7.96% | -1.99% | -9.29% | -7.55% |
Financial Performance: Revenue Collapse Drives Margin Erosion
Cosmo Ferrites' Q3 FY26 results reveal a business under severe strain. Net sales contracted 24.19% quarter-on-quarter to ₹19.18 crores, marking the lowest quarterly revenue in the dataset and reflecting weakening demand across the company's core ferrite manufacturing operations. On a year-on-year basis, sales declined 15.17%, indicating that the revenue weakness is not merely seasonal but structural in nature. The nine-month FY26 sales aggregate of ₹71.40 crores represents a concerning trajectory when compared to the full-year FY25 sales of ₹85.00 crores, suggesting the company is on track for a significant annual revenue decline.
Operating profitability deteriorated sharply, with EBITDA (excluding other income) plummeting to just ₹0.48 crores in Q3 FY26 from ₹1.13 crores in Q2 FY26—a 57.52% sequential decline. Operating margins compressed to 2.50% from 4.47%, reflecting adverse operating leverage as fixed costs remained sticky whilst revenues collapsed. Employee costs at ₹5.30 crores represented 27.63% of sales, an unsustainable cost structure for a business operating at such low margins. The company's inability to flex its cost base in response to revenue volatility points to structural inefficiencies in operations.
The quality of earnings remains questionable. Other income of ₹0.38 crores in Q3 FY26, whilst down from ₹0.99 crores in Q2 FY26, continues to provide a meaningful buffer to reported operating performance. However, even this non-core income could not prevent the company from sliding into deeper losses. Interest costs of ₹1.18 crores, coupled with depreciation of ₹1.19 crores, consumed the entirety of operating profits, resulting in a pre-tax loss of ₹1.76 crores. The tax credit of ₹0.44 crores provided marginal relief, but the net loss of ₹1.32 crores underscores the severity of the company's financial distress.
Operational Challenges: Debt Burden and Capital Inefficiency
Cosmo Ferrites' operational challenges are compounded by a highly leveraged balance sheet and weak capital efficiency. The company's net debt-to-equity ratio of 2.61 reflects a debt burden that is more than 2.5 times its shareholder equity, leaving minimal financial flexibility to weather the current downturn. Long-term debt stood at ₹17.40 crores as of March 2025, whilst current liabilities ballooned to ₹72.29 crores, raising concerns about the company's ability to meet near-term obligations. Trade payables of ₹10.63 crores suggest the company may be stretching payment cycles to manage liquidity, a red flag for operational stress.
Return on equity (ROE) has turned deeply negative at -10.43% on a latest basis, a stark reversal from the average ROE of 15.24% over the long term. This deterioration reflects not only the current losses but also the erosion of shareholder value as accumulated losses eat into reserves. Return on capital employed (ROCE) at just 0.24% on a latest basis—down from an average of 8.34%—indicates that the company is generating virtually no returns on the capital deployed in its business. With an average EBIT-to-interest coverage ratio of just 1.50 times, the company's ability to service its debt from operating profits is precarious at best.
⚠️ Critical Concerns: Debt and Capital Efficiency
High Leverage: Net debt-to-equity of 2.61 leaves minimal financial flexibility. Debt-to-EBITDA ratio of 11.00 indicates a highly leveraged structure with limited debt servicing capacity.
Weak Returns: Latest ROCE of 0.24% and negative ROE of -10.43% signal severe capital inefficiency and value destruction. Higher ROE is typically indicative of better performance, but the negative figure here reflects deep operational distress.
Interest Burden: Nine-month interest costs of ₹4.75 crores have grown 26.67% year-on-year, consuming operational cash flows and limiting reinvestment capacity.
The balance sheet reveals further stress. Shareholder funds declined to ₹24.66 crores in FY25 from ₹30.29 crores in FY24, reflecting the erosion from accumulated losses. Fixed assets at ₹62.79 crores represent the bulk of the asset base, but with sales-to-capital-employed ratio of just 1.08 times, asset utilisation remains suboptimal. The company's working capital dynamics have also deteriorated, with the debtors turnover ratio falling to a historical low of 4.40 times on a half-yearly basis, indicating slower collections and potential stress in receivables management.
Industry Context: Ferrite Manufacturing Under Pressure
The ferrite manufacturing industry, whilst serving critical applications in inverter transformers, EV chargers, mobile chargers, and switch-mode power supplies, faces headwinds from cyclical demand patterns and intense competition. Cosmo Ferrites' revenue decline suggests the company is losing market share or facing pricing pressures in its core segments. The company's inability to capitalise on growth in adjacent sectors such as electric vehicle charging infrastructure—where ferrite cores play a crucial role—raises questions about its product positioning and customer relationships.
Broader macroeconomic factors, including subdued industrial activity and cautious capital expenditure by end-users, may be contributing to the weak demand environment. However, Cosmo Ferrites' underperformance relative to the broader industrial manufacturing sector—which posted a 4.46% return over the past year compared to the company's 47.18% decline—suggests company-specific issues are at play. The lack of diversification in revenue streams and overdependence on a narrow customer base may be amplifying the impact of sector-specific challenges.
Market Positioning: Losing Ground in a Competitive Landscape
Cosmo Ferrites' micro-cap status (₹167.10 crore market capitalisation) limits its ability to compete with larger, better-capitalised peers. The company's high debt burden constrains its capacity to invest in capacity expansion, product innovation, or customer acquisition. With institutional holdings at a negligible 0.22%, the company lacks the backing of sophisticated investors who could provide strategic guidance or capital support during this distressed phase.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Dividend Yield |
|---|---|---|---|---|---|
| Cosmo Ferrites | NA (Loss Making) | 7.07 | 15.24% | 2.61 | NA |
| Loyal Equipments | 21.82 | 3.65 | 15.08% | 0.02 | 0.56% |
| Tulive Developer | NA (Loss Making) | 3.77 | 0.00% | -0.01 | NA |
| D & H India | 21.94 | 3.24 | 8.84% | 1.28 | NA |
| Gallard Steel | 25.99 | 7.38 | 0.00% | 0.00 | NA |
| Cospower Engineering | 74.40 | 7.13 | 6.15% | 0.93 | NA |
Relative to peers in the industrial manufacturing space, Cosmo Ferrites trades at a price-to-book value of 7.07 times—significantly higher than most peers despite being loss-making. This valuation disconnect suggests the market may be pricing in residual asset value or speculative turnaround hopes rather than fundamental business quality. The company's average ROE of 15.24% over the long term compares favourably to peers, but the latest negative ROE of -10.43% indicates this historical performance is no longer relevant. Importantly, higher ROE typically signals better capital efficiency and profitability, but Cosmo Ferrites' current negative ROE reflects severe operational distress and value destruction.
Valuation Analysis: Distressed Asset Pricing
With Cosmo Ferrites loss-making on a trailing twelve-month basis, traditional valuation metrics such as P/E ratio are not applicable. The stock trades at NA (Loss Making) on a P/E basis, rendering earnings-based valuation meaningless. Instead, investors must assess the company through the lens of distressed asset valuation, focusing on book value, liquidation value, and potential turnaround scenarios. At a price-to-book value of 7.07 times, the stock appears significantly overvalued relative to its net asset base of ₹20.50 per share, suggesting the market is pricing in optimistic recovery assumptions that may not materialise.
Enterprise value-to-EBITDA of 49.32 times and EV-to-EBIT of 233.78 times reflect the company's minimal profitability and high debt burden. These elevated multiples are not indicative of growth potential but rather the mathematical outcome of a distressed capital structure where enterprise value (inflated by debt) is divided by negligible operating profits. The company's overall valuation grade has been classified as "Risky" since August 2024, reflecting the market's recognition of the fundamental challenges facing the business.
The stock's 52-week range of ₹123.00 to ₹335.00 illustrates the extreme volatility and uncertainty surrounding the investment case. Currently trading at ₹138.90, the stock is just 12.93% above its 52-week low and 58.54% below its 52-week high. This price action reflects a market grappling with the company's deteriorating fundamentals and uncertain turnaround prospects. With no dividend yield and a zero dividend payout ratio, there is no income component to cushion investors during this distressed phase.
Shareholding Pattern: Stable but Uninspiring
Promoter holding in Cosmo Ferrites has remained stable at 63.65% over the past five quarters, indicating no change in control or strategic direction. The promoter group, led by Andheri Properties And Developers Private Limited (31.23%) and Super Sadiq Enterprises Private Limited (30.63%), has maintained its stake despite the company's financial deterioration. Critically, there is no promoter pledging, which removes one potential red flag related to financial stress at the promoter level. However, the absence of pledging does not necessarily signal confidence; it may simply reflect the limited value of the shares as collateral given the company's distressed state.
| Quarter | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 |
|---|---|---|---|---|---|
| Promoter | 63.65% | 63.65% | 63.65% | 63.65% | 63.65% |
| FII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Mutual Funds | 0.06% | 0.06% | 0.06% | 0.06% | 0.06% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.16% | 0.16% | 0.39% | 0.16% | 0.16% |
| Non-Institutional | 36.13% | 36.13% | 35.89% | 36.13% | 36.13% |
Institutional participation remains negligible, with mutual funds holding just 0.06%, FIIs at 0.00%, and other domestic institutional investors at 0.16%. The absence of institutional interest is telling—sophisticated investors have clearly avoided the stock, likely due to concerns about the company's financial health, governance, liquidity, and turnaround prospects. The marginal reduction in Other DII holdings from 0.39% in June 2025 to 0.16% in September 2025 suggests even the limited institutional presence is exiting. Non-institutional investors account for 36.13%, a relatively high proportion that may include retail investors attracted by the stock's volatility or speculative turnaround hopes.
Stock Performance: Severe Underperformance Across All Timeframes
Cosmo Ferrites' stock performance has been abysmal across virtually all timeframes, reflecting the market's loss of confidence in the company's prospects. Over the past year, the stock has plummeted 47.18%, vastly underperforming the Sensex's 10.33% gain and generating a negative alpha of 57.51 percentage points. The three-month return of -24.65% and six-month return of -45.74% underscore the acceleration of the decline, with the stock losing nearly half its value in just six months. Year-to-date, the stock is down 12.56%, compared to the Sensex's 1.23% decline, indicating continued weakness into 2026.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -9.22% | +0.42% | -9.64% |
| 1 Month | +5.11% | +0.71% | +4.40% |
| 3 Months | -24.65% | +0.36% | -25.01% |
| 6 Months | -45.74% | +4.43% | -50.17% |
| YTD | -12.56% | -1.23% | -11.33% |
| 1 Year | -47.18% | +10.33% | -57.51% |
| 2 Years | -34.03% | +17.57% | -51.60% |
| 3 Years | -31.39% | +38.71% | -70.10% |
The stock's technical profile is equally concerning. Trading in a bearish trend since September 8, 2025, when it was at ₹246.45, the stock has since declined 43.61%. It is currently trading below all major moving averages—5-day (₹147.36), 20-day (₹147.02), 50-day (₹155.41), 100-day (₹183.80), and 200-day (₹223.41)—indicating pervasive selling pressure. Technical indicators including MACD, RSI, Bollinger Bands, and KST are uniformly bearish, with no signs of a potential reversal. The stock's high beta of 1.37 suggests it is 37% more volatile than the broader market, amplifying both downside and upside moves—though recent history has been overwhelmingly to the downside.
Risk-adjusted returns paint an even grimmer picture. With a volatility of 60.25%—more than five times the Sensex's 11.52%—and a negative Sharpe ratio, the stock falls squarely into the "HIGH RISK LOW RETURN" category. The risk-adjusted return of -0.78 indicates that investors are being penalised for taking on the stock's extreme volatility. In contrast, the Sensex's risk-adjusted return of 0.90 highlights the opportunity cost of holding Cosmo Ferrites instead of diversified market exposure.
Investment Thesis: A Distressed Asset with Limited Upside
Cosmo Ferrites' investment thesis has fundamentally broken down. The company's proprietary Mojo Score of just 12 out of 100 places it firmly in the "STRONG SELL" category, with an explicit recommendation to "strongly consider selling" and that "exit is recommended." This score reflects the confluence of negative factors: bearish technical trend, negative financial trend, below-average quality grade, and risky valuation. The score has been in decline since April 2025, when it briefly touched 33, and has since deteriorated to its current nadir of 12 as of February 2026.
The quality assessment reveals a company with weak long-term fundamental strength. Average ROCE of 8.34% and latest ROCE of just 0.24% indicate the business is generating virtually no returns on deployed capital. Whilst the average ROE of 15.24% appears respectable, the latest ROE of -10.43% reflects the current reality of value destruction. Remember, higher ROE typically signals better capital efficiency and profitability—but Cosmo Ferrites' negative ROE indicates the company is eroding shareholder value rather than creating it. The company's high debt-to-EBITDA ratio of 11.00 times and weak EBIT-to-interest coverage of 1.50 times leave minimal room for error.
✅ KEY STRENGTHS
- ✓ No Promoter Pledging: Zero pledged shares removes one governance risk factor
- ✓ Stable Promoter Holding: 63.65% promoter stake unchanged over five quarters
- ✓ Historical Growth: 5-year sales CAGR of 14.30% demonstrates past expansion capability
- ✓ Niche Positioning: Soft ferrite cores serve critical applications in EV chargers, inverters, and power supplies
- ✓ Long Operating History: Incorporated in 1985, providing decades of industry experience
⚠️ KEY CONCERNS
- ✗ Persistent Losses: Three consecutive quarters of losses with Q3 FY26 loss of ₹1.32 crores
- ✗ Revenue Decline: Q3 FY26 sales of ₹19.18 crores down 24.19% QoQ and 15.17% YoY
- ✗ Margin Collapse: Operating margin of just 2.50% insufficient to cover fixed costs
- ✗ High Leverage: Net debt-to-equity of 2.61 and debt-to-EBITDA of 11.00 times
- ✗ Negative Returns: Latest ROE of -10.43% and ROCE of 0.24% signal value destruction
- ✗ Weak Coverage: EBIT-to-interest of 1.50 times provides minimal debt servicing buffer
- ✗ No Institutional Support: Just 0.22% institutional holdings indicates lack of sophisticated investor backing
Outlook: What to Watch
For Cosmo Ferrites to stage any meaningful recovery, the company must address multiple critical challenges simultaneously. Revenue stabilisation is paramount—the company needs to demonstrate that it can halt the sales decline and return to growth. Margin improvement through cost rationalisation and operational efficiency gains would provide breathing room for debt servicing. Balance sheet deleveraging, either through asset sales, equity infusion, or debt restructuring, is essential to reduce the financial burden. However, the path to recovery appears steep, and the near-term outlook remains fraught with risk.
✅ POSITIVE CATALYSTS
- ✓ Revenue stabilisation and return to growth in Q4 FY26
- ✓ Operating margin expansion above 5% through cost optimisation
- ✓ Successful debt restructuring or equity capital raise
- ✓ Improvement in working capital efficiency and receivables collection
- ✓ Strategic partnerships or customer wins in high-growth segments (EV charging)
🚩 RED FLAGS
- ✗ Further revenue decline below ₹19 crores quarterly run-rate
- ✗ Operating margins falling below 2% or turning negative
- ✗ Inability to service debt obligations or covenant breaches
- ✗ Continued deterioration in working capital metrics
- ✗ Promoter stake dilution or any pledging of shares
- ✗ Loss of key customers or market share
The company's financial trend has been classified as "Negative" since December 2025, with key concerns including 9-month interest costs growing 26.67% year-on-year, debtors turnover ratio at a historical low of 4.40 times, and Q3 FY26 net sales hitting the lowest quarterly level on record. These red flags suggest the operational challenges are intensifying rather than abating. Without a credible turnaround plan, aggressive cost restructuring, and potential capital infusion, the company risks further value destruction.
The Verdict: Exit Recommended
Score: 12/100
For Fresh Investors: Avoid entirely. The company is loss-making with deteriorating fundamentals, high leverage, and no clear path to profitability. The risk-reward profile is highly unfavourable, with significant downside potential and minimal upside visibility. Better opportunities exist in the industrial manufacturing space with healthier balance sheets and positive earnings trajectories.
For Existing Holders: Strongly consider exiting at current levels to limit further losses. With the stock down 47.18% over the past year and showing no signs of stabilisation, holding on in hopes of a recovery appears increasingly untenable. The company's negative financial trend, bearish technical setup, and weak fundamentals suggest further downside is likely. Any relief rallies should be used as exit opportunities rather than reasons to accumulate.
Fair Value Estimate: Given the company's loss-making status and distressed balance sheet, traditional fair value estimates are not meaningful. Book value of ₹20.50 per share provides a theoretical floor, but liquidation value could be significantly lower given the company's operational challenges. Current price of ₹138.90 implies a 7.07x price-to-book multiple that appears unjustified given the negative earnings and uncertain recovery prospects. Downside risk to ₹100-110 levels (approximately 5x book value) appears material if losses persist.
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.
