The quarter showcased a stark disconnect between topline momentum and bottom-line delivery. Whilst net sales surged 111.59% year-on-year to ₹20.08 crores from ₹9.49 crores, sequential revenue declined 16.44% from Q1 FY26's ₹24.03 crores. More concerning, the company's PAT margin compressed to a mere 0.65%, down from 1.08% in the previous quarter, highlighting severe profitability challenges despite robust revenue expansion.
Financial Performance: Revenue Growth Fails to Translate into Profits
Country Club Hospitality's Q2 FY26 results reveal a troubling pattern of margin erosion amidst topline growth. Net sales of ₹20.08 crores marked a substantial 111.59% year-on-year increase, yet the company struggled to convert this into meaningful profitability. Operating profit before depreciation, interest, tax and other income (PBDIT) stood at ₹1.67 crores with an operating margin of 8.32%, marginally lower than Q1 FY26's 9.90%.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 20.08 | -16.44% | 0.13 | -50.00% | 8.32% |
| Jun'25 | 24.03 | +87.30% | 0.26 | -97.14% | 9.90% |
| Mar'25 | 12.83 | +12.25% | 9.08 | -910.71% | -73.58% |
| Dec'24 | 11.43 | +20.44% | -1.12 | -65.85% | 18.29% |
| Sep'24 | 9.49 | -22.66% | -3.28 | +993.33% | -11.80% |
| Jun'24 | 12.27 | -1.52% | -0.30 | -104.88% | 2.04% |
The quarter's profit before tax stood at a meagre ₹0.23 crores, with tax expense of ₹0.09 crores resulting in the final net profit of ₹0.13 crores. The company's gross profit margin improved to 16.53% from 14.52% in Q1 FY26, suggesting better pricing power or cost management at the gross level. However, this improvement failed to flow through to the bottom line, indicating significant operating expense pressures.
On a half-yearly basis (H1 FY26), the company reported combined net sales of ₹44.11 crores with net profit of ₹0.39 crores, translating to a PAT margin of just 0.88%. Employee costs remained relatively stable at ₹3.53 crores in Q2 FY26 compared to ₹3.29 crores in Q1 FY26, whilst depreciation held steady at ₹3.09 crores across both quarters.
Critical Profitability Alert
The company's other income of ₹1.82 crores in Q2 FY26 represented 791.30% of profit before tax, indicating the company's core operations are barely profitable. Without substantial other income contributions, the business would have reported losses, highlighting fundamental operational weaknesses.
Operational Challenges: Weak Returns Signal Capital Inefficiency
Country Club Hospitality's operational metrics paint a concerning picture of capital efficiency and profitability. The company's average return on capital employed (ROCE) over recent periods stands at a deeply negative 7.64%, whilst the latest ROCE figure of -6.13% shows marginal improvement but remains well below acceptable thresholds. This negative ROCE indicates the company is destroying shareholder value through its operations.
Return on equity (ROE) tells a similarly troubling story. With an average ROE of just 1.08% and latest ROE of 1.39%, the company generates minimal returns for shareholders relative to the equity capital deployed. For context, investors would earn better returns from risk-free government securities, raising serious questions about the viability of the business model.
Balance Sheet Under Strain
As of March 2025, shareholder funds stood at ₹316.03 crores against fixed assets of ₹517.94 crores. Long-term debt of ₹20.82 crores has declined from ₹23.75 crores in the previous year, showing some deleveraging progress. However, the company's EBIT to interest coverage ratio averaged a weak -6.75x, indicating the business struggles to generate sufficient operating profits to service even its modest debt burden. Current assets of ₹68.19 crores provide some liquidity cushion against current liabilities of ₹107.57 crores, though this negative working capital position warrants monitoring.
The company's five-year sales growth of -3.50% reflects sustained topline contraction, whilst five-year EBIT growth of 10.27% suggests some operational improvements from a low base. Sales to capital employed averaged just 0.15x, indicating the company generates minimal revenue relative to the capital invested in the business – a hallmark of capital-intensive businesses with poor asset utilisation.
Hospitality Sector Context: Underperforming Peers Significantly
The Indian hospitality sector has faced headwinds in recent quarters, yet Country Club Hospitality's struggles appear company-specific rather than sector-wide. Over the past year, the stock declined 21.89% whilst the broader Hotels & Resorts sector fell just 2.21%, resulting in underperformance of 19.68 percentage points relative to industry peers.
The company's membership-based holiday club model differs from traditional hotel operations, focusing on selling vacation ownership and membership packages. However, this model has failed to generate consistent profitability, with the company reporting losses in multiple recent quarters. The heavy reliance on other income to achieve marginal profitability suggests the core membership business faces fundamental challenges in generating sustainable cash flows.
| Company | P/E Ratio | P/BV Ratio | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Country Club Hospitality | 31.71x | 0.84x | 1.08% | 0.06 |
| Phoenix Township | 82.34x | 0.90x | 1.09% | 0.78 |
| The Byke Hospitality | 59.76x | 1.38x | 1.68% | 0.41 |
| Sayaji Hotels Pune | 13.04x | 3.03x | 23.54% | -0.03 |
| Graviss Hospitality | NA (Loss Making) | 1.46x | 1.87% | 0.02 |
| Sayaji Indore | 23.51x | 4.12x | 15.37% | 0.83 |
Peer Comparison: Valuation Discount Reflects Poor Quality
Country Club Hospitality trades at a significant discount to hospitality peers across most valuation metrics, yet this discount appears justified given the company's inferior operational performance. At a P/E ratio of 31.71x, the stock trades below the industry average P/E of 51x, reflecting market scepticism about earnings sustainability.
The company's price-to-book ratio of 0.84x trades at a substantial discount to peers, with Sayaji Hotels Pune at 3.03x and Sayaji Indore at 4.12x. This discount reflects the market's assessment that Country Club's assets generate minimal economic value, as evidenced by the company's ROE of just 1.08% compared to Sayaji Hotels Pune's impressive 23.54%.
Whilst Country Club maintains lower leverage with a debt-to-equity ratio of 0.06 compared to Phoenix Township's 0.78, this conservative balance sheet has not translated into superior returns. The company's asset-light balance sheet should theoretically support higher ROE, yet the opposite holds true, suggesting fundamental business model challenges rather than capital structure issues.
Valuation Analysis: Discount Reflects Structural Concerns
Country Club Hospitality's valuation metrics present a complex picture. Trading at ₹16.09 as of November 18, 2025, the stock sits 30.04% below its 52-week high of ₹23.00 and 24.73% above its 52-week low of ₹12.90. The company's market capitalisation of ₹262.00 crores reflects its micro-cap status, with limited institutional participation at just 0.49% institutional holdings.
The stock's P/E ratio of 32x might appear reasonable in isolation, yet this multiple is misleading given the company's razor-thin profit margins and heavy reliance on other income. Book value per share of ₹19.07 compares to the current market price of ₹16.09, suggesting the stock trades at 0.84x book value – a discount that reflects market concerns about asset quality and earnings power.
Valuation Dashboard
P/E Ratio (TTM): 31.71x
Price to Book: 0.84x
Dividend Yield: Not Available
Overall Assessment: RISKY
Mojo Score: 17/100 (Strong Sell)
The company's enterprise value metrics tell an unusual story, with EV/EBITDA at -86.29x and EV/EBIT at -18.18x. These negative multiples result from the company's minimal debt position and cash holdings, creating an enterprise value lower than market capitalisation. However, investors should not interpret this as a value opportunity given the company's poor operational performance and negative ROCE.
Shareholding: Stable Promoter Base, Minimal Institutional Interest
Country Club Hospitality's shareholding pattern reveals high promoter concentration with minimal institutional participation. Promoter holding has remained stable at 73.80% across the past five quarters, with no pledging of shares – a positive sign of promoter confidence in the business.
| Quarter | Promoter | FII | Mutual Funds | Insurance | Non-Institutional |
|---|---|---|---|---|---|
| Sep'25 | 73.80% | 0.49% | 0.00% | 0.00% | 25.71% |
| Jun'25 | 73.80% | 0.49% | 0.00% | 0.00% | 25.71% |
| Mar'25 | 73.80% | 0.49% | 0.00% | 0.00% | 25.71% |
| Dec'24 | 73.80% | 0.49% | 0.00% | 0.00% | 25.71% |
| Sep'24 | 73.80% | 0.00% | 0.00% | 0.00% | 25.71% |
Foreign institutional investor (FII) holding stands at a minimal 0.49%, with just one FII holding shares. Mutual fund and insurance company holdings remain at zero, indicating complete absence of domestic institutional investors. This lack of institutional participation reflects concerns about the company's business model, profitability, and growth prospects.
The non-institutional shareholding of 25.71% has remained stable, suggesting retail investors have neither accumulated nor distributed shares aggressively. The stable shareholding pattern amidst deteriorating stock performance indicates existing shareholders may be trapped rather than confident in a turnaround.
Stock Performance: Sustained Underperformance Across Timeframes
Country Club Hospitality's stock has delivered disappointing returns across most timeframes, significantly underperforming the broader market. Over the past year, the stock declined 21.89% whilst the Sensex gained 9.48%, resulting in negative alpha of 31.37 percentage points. This underperformance has accelerated in recent months, with the stock down 4.91% over one month versus the Sensex's 0.86% gain.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.37% | +0.96% | -3.33% |
| 1 Month | -4.91% | +0.86% | -5.77% |
| 3 Months | -9.35% | +4.18% | -13.53% |
| 6 Months | -0.31% | +2.85% | -3.16% |
| YTD | -13.68% | +8.36% | -22.04% |
| 1 Year | -21.89% | +9.48% | -31.37% |
| 2 Years | +68.31% | +28.69% | +39.62% |
| 3 Years | +116.26% | +37.31% | +78.95% |
The stock's longer-term performance shows greater variability. Over two years, Country Club delivered 68.31% returns versus the Sensex's 28.69%, generating positive alpha of 39.62 percentage points. Three-year returns of 116.26% significantly outpaced the Sensex's 37.31%, suggesting the stock experienced a strong rally in earlier periods that has since reversed.
From a technical perspective, the stock entered bearish territory on November 13, 2025, at ₹16.45, transitioning from a previously mildly bearish trend. The stock trades below all key moving averages – 5-day (₹16.35), 20-day (₹16.73), 50-day (₹17.01), 100-day (₹17.52), and 200-day (₹17.07) – indicating sustained selling pressure across timeframes. With a beta of 1.50, the stock exhibits 50% higher volatility than the broader market, amplifying both gains and losses.
Investment Thesis: Below Average Quality Meets Risky Valuation
Country Club Hospitality's investment profile reflects the challenges facing the business. The company's overall quality grade stands at "Below Average," reflecting weak long-term financial performance characterised by negative ROCE, minimal ROE, and inconsistent profitability. The valuation assessment of "Risky" appropriately captures the uncertainty surrounding the company's ability to generate sustainable profits.
Mojo Parameters Dashboard
Overall Score: 17/100
Quality Grade: Below Average
Valuation: Risky
Financial Trend: Positive (Q2 FY26)
Technical Trend: Bearish
Rating: STRONG SELL
The company's proprietary score of 17 out of 100 places it firmly in "Strong Sell" territory, with the rating unchanged since September 2025. This low score reflects multiple headwinds: bearish technical trends, weak fundamental strength with average ROCE near zero, and sustained underperformance versus the broader market over the past year.
Interestingly, the short-term financial trend for Q2 FY26 registered as "Positive," driven by revenue growth and improving debtors turnover ratio. However, this positive classification appears misleading given the quarter's margin compression and profit decline, highlighting limitations in mechanical trend classifications that fail to capture profitability quality.
Key Strengths & Risk Factors
Key Strengths
- Strong revenue growth of 111.59% year-on-year in Q2 FY26 demonstrates topline momentum
- Zero promoter pledging with stable 73.80% promoter holding indicates management confidence
- Low leverage with debt-to-equity of 0.06 provides financial flexibility
- Improving debtors turnover ratio of 13.22 times in H1 FY26 shows better working capital management
- Established brand in membership-based holiday club segment with 34-year operating history
Key Concerns
- Razor-thin PAT margin of 0.65% in Q2 FY26 indicates severe profitability challenges
- Other income represents 791.30% of profit before tax, masking operational losses
- Negative ROCE of -6.13% and minimal ROE of 1.39% signal capital destruction
- Five-year sales decline of 3.50% reflects sustained business contraction
- Complete absence of mutual fund and insurance holdings indicates institutional disinterest
- Stock underperformed Hotels & Resorts sector by 19.68 percentage points over past year
- Bearish technical trend with stock trading below all major moving averages
Outlook: What to Watch
Positive Catalysts
- Sustained revenue growth converting into improved operating margins above 12-15%
- Reduction in reliance on other income with core business profitability
- ROE improvement to double digits through better asset utilisation
- Entry of institutional investors signalling improved business quality perception
Red Flags
- Further margin compression below 8% operating margin levels
- Sequential revenue decline continuing for multiple quarters
- Increase in debt levels without corresponding ROCE improvement
- Promoter stake dilution or emergence of pledging
- Stock breaking below ₹12.90 support (52-week low)
"With other income masking operational losses and returns on capital deeply negative, Country Club Hospitality exemplifies a business trading on hope rather than fundamentals."
The Verdict: Exit Opportunity, Not Entry Point
Score: 17/100
For Fresh Investors: Avoid initiating positions. The company's negative ROCE, minimal ROE, and heavy reliance on other income for profitability indicate fundamental business model challenges that cannot be justified at any valuation. The absence of institutional investors and sustained underperformance versus peers reflect market recognition of these structural issues.
For Existing Holders: Consider exiting positions on any technical bounce towards ₹17-18 levels. The bearish technical setup, deteriorating fundamentals, and lack of visible catalysts suggest limited upside potential with significant downside risk. The stock's 30% decline from its 52-week high may extend further if operational metrics fail to improve materially.
Fair Value Estimate: ₹12.00-13.00 (25-35% downside from current levels), reflecting the company's below-average quality profile, risky valuation, and persistent profitability challenges that show no signs of near-term resolution.
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.
