The company, with a market capitalisation of ₹1,045 crores, saw its stock rise 2.42% to ₹706.25 following the results announcement. However, the stock remains 11.28% below its 52-week high of ₹796, reflecting investor caution despite the strong operational performance. The quarter's headline numbers mask underlying margin pressures that warrant closer examination.
The December quarter marked a significant inflection point for Creative Newtech, with net sales jumping 39.38% sequentially to ₹914 crores from ₹655.75 crores in Q2 FY26. This represents the highest quarterly revenue in the company's history and reflects strong demand dynamics in the peripherals distribution segment. Year-on-year comparison shows an equally impressive 38.68% growth from ₹659.06 crores in Q3 FY25, suggesting sustained market share gains and operational momentum.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 914.00 | +39.38% | 23.37 | +23.32% | 2.56% |
| Sep'25 | 655.75 | +66.87% | 18.95 | +86.15% | 2.89% |
| Jun'25 | 392.96 | -2.49% | 10.18 | -25.86% | 2.59% |
| Mar'25 | 402.99 | -38.85% | 13.73 | -19.57% | 3.41% |
| Dec'24 | 659.06 | +60.19% | 17.07 | +29.12% | 2.59% |
| Sep'24 | 411.42 | +36.68% | 13.22 | +45.43% | 3.21% |
| Jun'24 | 301.01 | — | 9.09 | — | 3.02% |
Financial Performance: Strong Top-Line Growth Masks Margin Compression
Whilst revenue growth has been exemplary, the company's profitability metrics reveal a more nuanced picture. Operating profit (PBDIT excluding other income) for Q3 FY26 stood at ₹26.50 crores, representing a margin of 2.91%, up from 1.85% in Q3 FY25 but down from 3.49% in Q2 FY26. This sequential margin contraction of 58 basis points suggests rising competitive pressures or operational costs that merit close monitoring.
The PAT margin of 2.56% in Q3 FY26 remained virtually flat compared to 2.59% in Q3 FY25, despite the significant revenue expansion. This margin stability, whilst commendable in a high-growth phase, indicates that the company is reinvesting heavily in growth rather than optimising for near-term profitability. Employee costs rose to ₹5.82 crores from ₹4.31 crores year-on-year, reflecting the talent investments necessary to support the expanding operations.
Interest costs increased to ₹5.99 crores in Q3 FY26 from ₹3.56 crores in Q3 FY25, reflecting higher working capital requirements to support the expanded revenue base. The company's debt servicing capability remains adequate with an EBIT to interest coverage ratio averaging 3.35 times, though this is classified as weak by traditional standards. Tax efficiency improved marginally, with the effective tax rate declining to 11.61% from 14.05% year-on-year, providing some support to bottom-line growth.
Margin Dynamics: A Balancing Act
Creative Newtech's margin trajectory reveals the classic trade-off between growth and profitability. Whilst the company has successfully scaled revenues at an impressive 38.68% year-on-year clip, operating margins have remained range-bound between 2.5% and 3.5% over the past seven quarters. This suggests the distribution business operates in a highly competitive environment where pricing power is limited. The sequential margin compression from 3.49% in Q2 to 2.91% in Q3 warrants monitoring, particularly if this trend persists into Q4 FY26.
Operational Efficiency: Strong Returns Offset by Moderate Leverage
Creative Newtech's return on equity of 20.64% stands out as a key strength, indicating efficient deployment of shareholder capital. This ROE significantly exceeds the company's cost of equity and reflects the management's ability to generate attractive returns despite operating in a capital-intensive distribution business. The return on capital employed (ROCE) of 13.39% for the latest period, whilst lower than ROE due to the inclusion of debt capital, remains healthy and supports the company's valuation multiple of 2.69 times enterprise value to capital employed.
The company's balance sheet reveals a lean capital structure with shareholder funds of ₹294.01 crores as of March 2025, up substantially from ₹215.71 crores a year earlier. Long-term debt declined to ₹2.27 crores from ₹7.28 crores, indicating deleveraging efforts. However, current liabilities surged to ₹219.07 crores from ₹128.99 crores, primarily driven by trade payables that jumped to ₹135.35 crores from ₹52.12 crores. This increase in payables reflects the working capital intensity of the growing business and requires careful management to maintain supplier relationships.
Current assets stood at ₹518 crores as of March 2025, providing adequate coverage for current liabilities and supporting the company's liquidity position. The cash position improved dramatically to ₹43 crores from ₹7 crores year-on-year, though cash flow from operations remained modest at ₹21 crores for FY25. The company's working capital cycle appears stretched, with debtor turnover ratio declining to 4.45 times in the half-year period, suggesting slower collections that could pressure cash flows if not addressed.
Key Operational Strengths
Exceptional ROE of 20.64%: Creative Newtech's return on equity significantly outpaces industry averages, demonstrating superior capital efficiency. This metric places the company in the top quartile of its peer group and justifies the premium valuation multiple. The company has consistently maintained ROE above 18% over the past three years, indicating sustainable competitive advantages in its distribution model.
Deleveraging Progress: The reduction in long-term debt from ₹7.28 crores to ₹2.27 crores reflects prudent financial management. Combined with improving cash generation, this positions the company well for future growth investments without excessive reliance on external financing.
Growth Trajectory: Five-Year CAGR of 37% Underpins Investment Case
Creative Newtech's long-term growth credentials remain impressive, with net sales compounding at 37.10% annually over the past five years. This growth rate substantially exceeds nominal GDP growth and reflects significant market share gains in the peripherals distribution space. Operating profit (EBIT) has grown at a similar 35.17% CAGR, indicating that the company has maintained operational leverage despite the rapid expansion.
The company's revenue progression from ₹457 crores in FY20 to ₹1,782 crores in FY25 represents a near-quadrupling of the business in just five years. Profit after tax expanded even more dramatically from ₹7 crores to ₹53 crores over the same period, reflecting improving profitability as the business scales. The consistency of this growth trajectory, with positive year-on-year expansion in each of the past five years, provides confidence in the sustainability of the business model.
| Financial Year | Revenue (₹ Cr) | YoY Growth | PAT (₹ Cr) | YoY Growth | PAT Margin |
|---|---|---|---|---|---|
| FY25 | 1,782.00 | +3.6% | 53.00 | +10.4% | 3.0% |
| FY24 | 1,720.00 | +23.6% | 48.00 | +77.8% | 2.8% |
| FY23 | 1,392.00 | +47.0% | 27.00 | +42.1% | 1.9% |
| FY22 | 947.00 | +82.1% | 19.00 | +111.1% | 2.0% |
| FY21 | 520.00 | +13.8% | 9.00 | +28.6% | 1.7% |
| FY20 | 457.00 | — | 7.00 | — | 1.5% |
However, the growth rate decelerated markedly in FY25, with revenue advancing just 3.6% compared to 23.6% in FY24. This slowdown appears temporary based on the strong quarterly performance in the first three quarters of FY26, where revenue growth has re-accelerated to the 30-40% range. The company's ability to return to high growth rates after the FY25 pause demonstrates resilience and suggests the underlying demand drivers remain intact.
Peer Comparison: Premium Valuation Justified by Superior Returns
Creative Newtech trades at a price-to-earnings ratio of 17.70 times trailing twelve-month earnings, representing a significant discount to several peers in the miscellaneous sector. The company's P/E multiple appears reasonable when contextualized against its 20.64% return on equity, which substantially exceeds the peer group average. The price-to-book ratio of 3.29 times reflects the market's recognition of the company's ability to generate returns well above its cost of capital.
| Company | P/E (TTM) | ROE (%) | P/BV | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Creative Newtech | 17.70 | 20.64 | 3.29 | 0.35 | 0.07 |
| Dredging Corpn. | NA (Loss Making) | 0.83 | 2.43 | 0.81 | 0.00 |
| Ramco Inds. | 12.09 | 4.84 | 0.64 | 0.02 | 0.31 |
| R M Drip & Sprin | 115.29 | 9.81 | 31.82 | 0.41 | 0.03 |
| A-1 | 576.92 | 4.65 | 29.78 | 0.34 | 0.12 |
| Kokuyo Camlin | 32.20 | 6.78 | 2.63 | -0.04 | 0.00 |
The peer comparison reveals Creative Newtech's competitive advantages clearly. With an ROE of 20.64%, the company generates returns nearly four times the peer group average of approximately 5%. This superior return profile justifies the premium valuation multiples relative to book value. The company's debt-to-equity ratio of 0.35 remains moderate and comparable to peers, indicating that the strong returns are not achieved through excessive financial leverage.
Creative Newtech's dividend yield of 0.07% appears nominal, reflecting the company's preference to reinvest earnings for growth rather than distribute them to shareholders. This capital allocation strategy appears appropriate given the attractive returns on incremental capital and the significant growth opportunities in the distribution business. The latest dividend of ₹0.50 per share, declared in September 2025, represents a token payout that maintains the dividend track record without constraining growth investments.
Valuation Analysis: Very Attractive Entry Point Despite Recent Rally
At the current price of ₹706.25, Creative Newtech's valuation metrics suggest an attractive entry point for long-term investors. The stock trades at 18 times trailing earnings, below the industry average P/E of 26 times, despite demonstrating superior growth and profitability metrics. The enterprise value to EBITDA multiple of 19.70 times appears elevated in absolute terms but must be viewed in context of the company's 37% revenue CAGR and improving profitability trajectory.
The company's valuation grade has been classified as "Very Attractive" since August 2025, upgraded from "Attractive" in May 2025. This assessment reflects the stock's correction from its peak levels combined with sustained operational improvements. The stock currently trades 11.28% below its 52-week high of ₹796, providing a margin of safety for new investors. The 52-week range of ₹645.55 to ₹796 indicates moderate volatility, with the current price positioned in the upper half of this range.
The PEG ratio of 4.56 suggests the stock trades at a premium to its growth rate, which typically indicates expensive valuation. However, this metric can be misleading for companies in transition phases or those with lumpy quarterly results. Given Creative Newtech's return to 30%+ growth rates in FY26 after the FY25 slowdown, the PEG ratio may overstate valuation concerns. A more relevant comparison focuses on the P/E to ROE relationship, where the company's 17.70 P/E against 20.64% ROE suggests reasonable valuation for the quality of returns generated.
Shareholding Pattern: Stable Promoter Base with Limited Institutional Interest
Creative Newtech's shareholding structure reflects a promoter-driven company with limited institutional participation. Promoter holding stood at 56.62% as of December 2025, unchanged from September 2025 but marginally higher than the 56.16% holding in December 2024. The stable promoter stake provides governance comfort and indicates long-term commitment from the founding shareholders. Notably, there is zero promoter pledging, eliminating concerns about potential forced selling or financial distress at the promoter level.
| Quarter | Promoter (%) | FII (%) | MF (%) | Insurance (%) | Other DII (%) | Non-Inst (%) |
|---|---|---|---|---|---|---|
| Dec'25 | 56.62 | 0.22 | 0.00 | 0.00 | 1.04 | 42.12 |
| Sep'25 | 56.62 | 0.37 | 0.00 | 0.00 | 0.98 | 42.03 |
| Jun'25 | 56.60 | 1.01 | 0.00 | 0.00 | 0.96 | 41.43 |
| Mar'25 | 56.60 | 0.98 | 0.00 | 0.00 | 0.96 | 41.47 |
| Dec'24 | 56.16 | 0.89 | 0.00 | 0.00 | 1.52 | 41.43 |
Foreign institutional investor (FII) holding declined to 0.22% in December 2025 from 1.01% in June 2025, representing a consistent reduction over the past two quarters. This reduction suggests profit-booking by foreign investors following the stock's strong performance. The absence of mutual fund holding (0.00%) and insurance company participation (0.00%) indicates that Creative Newtech remains largely undiscovered by mainstream institutional investors, presenting both opportunity and risk.
The low institutional holding of just 1.26% in aggregate suggests significant upside potential if the company attracts attention from mutual funds or insurance companies. However, it also implies higher volatility and liquidity constraints, as the 42.12% non-institutional holding typically exhibits more sentiment-driven trading behaviour. The gradual increase in non-institutional holding from 41.43% to 42.12% over the past year suggests growing retail investor interest in the story.
Stock Performance: Short-Term Strength Amid Limited Trading History
Creative Newtech's stock has demonstrated resilience in recent trading sessions, gaining 4.69% over the past week and 2.42% on the day of the results announcement. The stock outperformed the Sensex by 3.78 percentage points over the past week, reflecting positive investor sentiment towards the quarterly results. However, the one-month performance shows a decline of 2.32%, marginally better than the Sensex's 2.49% fall, indicating some relative strength during market corrections.
| Period | Stock Return (%) | Sensex Return (%) | Alpha (%) |
|---|---|---|---|
| 1 Day | +2.42 | -0.60 | +3.02 |
| 1 Week | +4.69 | +0.91 | +3.78 |
| 1 Month | -2.32 | -2.49 | +0.17 |
| YTD | -1.95 | -2.24 | +0.29 |
The year-to-date performance shows a modest decline of 1.95%, marginally outperforming the Sensex's 2.24% fall. This relative outperformance during a challenging market environment demonstrates the stock's defensive characteristics and investor confidence in the business fundamentals. The limited availability of longer-term return data reflects the company's relatively recent listing history and smaller market capitalisation, which has kept it off the radar of many market participants.
Technical indicators present a mixed picture, with the stock currently in a "sideways" trend since January 30, 2026. The stock trades above its 5-day moving average of ₹682.54 and 20-day moving average of ₹698.04, suggesting short-term momentum remains positive. The immediate support level sits at ₹645.55 (the 52-week low), whilst resistance appears around the ₹698-700 zone. A decisive break above ₹750 could open the path towards retesting the 52-week high of ₹796.
Investment Thesis: Quality Growth Story with Execution Risks
Creative Newtech presents a compelling investment case built on three pillars: exceptional long-term growth (37% revenue CAGR), superior return on equity (20.64%), and attractive valuation (18 times earnings). The company operates in the distribution and peripherals space, benefiting from India's digital transformation and increasing technology adoption. The consistent market share gains evidenced by the sustained revenue growth suggest competitive advantages in distribution network, vendor relationships, or customer service.
The company's quality assessment as "Average" reflects both strengths and areas requiring improvement. Positive factors include strong ROE, healthy long-term growth, zero promoter pledging, and low leverage (debt-to-equity of 0.35). However, the weak EBIT-to-interest coverage of 3.35 times and minimal institutional holdings of 1.26% represent concerns. The average quality grade suggests the company is in a transition phase, building track record and institutional credibility whilst scaling operations.
The financial trend classification of "Positive" since December 2024 reflects the strong quarterly performance, with Q3 FY26 recording highest-ever revenue and profit. However, certain metrics such as ROCE and debtor turnover ratio have shown deterioration in the half-year period, warranting close monitoring. The technical trend remains sideways, suggesting consolidation after the recent rally, with the stock awaiting a catalyst to break out of the current range.
Key Strengths & Risk Factors
✅ KEY STRENGTHS
- Exceptional ROE of 20.64%: Significantly above industry average, indicating superior capital efficiency and sustainable competitive advantages
- Strong revenue growth momentum: 37.10% five-year CAGR demonstrates consistent market share gains and scalability of business model
- Attractive valuation: Trading at 18x P/E versus 26x industry average, with very attractive valuation grade providing margin of safety
- Zero promoter pledging: Eliminates governance concerns and demonstrates promoter confidence in business prospects
- Improving cash generation: Cash position jumped to ₹43 crores from ₹7 crores, strengthening financial flexibility
- Deleveraging trajectory: Long-term debt reduced from ₹7.28 crores to ₹2.27 crores, improving financial stability
- Positive financial trend: Q3 FY26 recorded highest-ever quarterly revenue and profit, indicating strong operational momentum
⚠️ KEY CONCERNS
- Margin pressure: Operating margin declined sequentially from 3.49% to 2.91%, raising questions about pricing power and competitive intensity
- Weak interest coverage: EBIT-to-interest ratio of 3.35x classified as weak, limiting financial flexibility for growth investments
- Working capital strain: Debtor turnover ratio declined to 4.45 times, suggesting slower collections that could pressure cash flows
- Limited institutional participation: Just 1.26% institutional holding increases volatility risk and limits liquidity for larger investors
- High PEG ratio: PEG of 4.56 suggests stock trades at premium to growth rate, limiting upside if growth disappoints
- Moderate debt-to-EBITDA: Ratio of 2.74 indicates moderate debt burden that could constrain expansion plans
- Limited trading history: Absence of long-term return data makes valuation assessment and trend analysis challenging
Outlook: What to Watch in Coming Quarters
📈 POSITIVE CATALYSTS
- Margin recovery: Improvement in operating margins back towards 3.5% levels would validate pricing power and operational efficiency
- Institutional discovery: Entry of mutual funds or insurance companies could re-rate the stock and improve liquidity
- Working capital improvement: Faster debtor collections and improved turnover ratios would strengthen cash generation
- Sustained revenue growth: Continuation of 30%+ quarterly growth rates would reinforce the long-term growth thesis
- Market share gains: Evidence of gaining share from competitors or entering new product categories would support premium valuation
🚨 RED FLAGS
- Further margin compression: Operating margins falling below 2.5% would signal structural profitability challenges
- Deteriorating asset quality: Continued decline in debtor turnover or increase in receivables days would raise working capital concerns
- Growth deceleration: Revenue growth falling below 20% without corresponding margin improvement would challenge the investment thesis
- Rising debt levels: Increase in leverage or deterioration in interest coverage would constrain financial flexibility
- Promoter stake reduction: Any decline in promoter holding below 55% could signal lack of confidence or funding pressures
The Verdict: Promising Growth Story for Patient Investors
Score: 54/100
For Fresh Investors: Creative Newtech offers an attractive blend of growth (37% CAGR), quality (20.6% ROE), and valuation (18x P/E) that warrants consideration for investors with a 3-5 year horizon. However, the margin pressures, working capital concerns, and limited institutional participation suggest waiting for a better entry point around ₹650-670 levels. Investors comfortable with micro-cap volatility and limited liquidity can consider building positions in tranches.
For Existing Holders: Continue to hold positions with a close watch on quarterly margin trends and working capital metrics. The strong Q3 performance validates the business model, and the very attractive valuation grade provides downside protection. Consider trimming positions if the stock rallies above ₹750 without corresponding improvement in operating margins, or add on dips towards ₹650 support levels.
Fair Value Estimate: ₹750-780 (6-10% upside from current levels), based on 20x P/E multiple applied to estimated FY26 earnings of ₹37-39 per share, reflecting the company's superior ROE and growth profile offset by margin and working capital concerns.
Rationale: The Hold rating reflects Creative Newtech's solid fundamentals and attractive valuation tempered by near-term execution challenges. Whilst the 37% revenue CAGR and 20.6% ROE justify investor interest, the sequential margin compression and working capital deterioration require resolution before a more bullish stance is warranted. The stock offers asymmetric risk-reward for patient investors willing to ride through the consolidation phase, with significant upside potential if management successfully addresses the operational concerns whilst maintaining growth momentum.
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 registered investment advisors and do not provide personalised investment advice. All investments carry risk, including the potential loss of principal.
