The September quarter results paint a concerning picture of a company grappling with severe operational challenges. Net sales plummeted 38.86% sequentially to ₹306.16 crores, whilst year-on-year revenues declined 18.75%. More alarmingly, operating profit before depreciation, interest, and tax (excluding other income) turned deeply negative at ₹-9.01 crores, translating to an operating margin of -2.94%—a sharp reversal from the 3.27% margin recorded in Q1 FY26. The company's inability to maintain positive operating metrics despite seasonal demand patterns raises fundamental questions about pricing power, cost management, and competitive positioning in the building materials sector.
The stock closed at ₹431.85 on February 06, 2026, down 1.58% on the day, and trading significantly below all key moving averages. With the share price hovering just 7.43% above its 52-week low of ₹402.00 and a precipitous 42.27% below its 52-week high of ₹748.00, investor sentiment remains deeply pessimistic. The company's proprietary Mojo Score of 22 out of 100 carries a "Strong Sell" rating, reflecting deteriorating fundamentals, bearish technicals, and risky valuation metrics.
Financial Performance: A Quarter of Severe Deterioration
The second quarter of FY26 marked one of the worst performances in Everest Industries' recent history. Net sales of ₹306.16 crores represented not only a 38.86% sequential decline but also an 18.75% year-on-year contraction. This revenue erosion appears driven by both volume pressures and potentially weaker realisation across the company's product portfolio of roofing sheets, interior panels, and non-asbestos flat sheets.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Operating Profit (₹ Cr) | Operating Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 306.16 | -38.86% | -9.01 | -2.94% | -18.17 | -5.93% |
| Jun'25 | 500.72 | +10.62% | 16.39 | 3.27% | 1.63 | 0.33% |
| Mar'25 | 452.63 | +21.99% | 10.31 | 2.28% | 7.64 | 1.69% |
| Dec'24 | 371.03 | -1.54% | -5.55 | -1.50% | -15.48 | -4.17% |
| Sep'24 | 376.82 | -27.86% | -1.71 | -0.45% | -11.67 | -3.10% |
| Jun'24 | 522.34 | +20.88% | 26.85 | 5.14% | 15.91 | 3.05% |
| Mar'24 | 432.11 | — | 14.66 | 3.39% | 5.44 | 1.26% |
The margin compression story is particularly troubling. Operating profit (PBDIT) excluding other income plunged to ₹-9.01 crores from ₹16.39 crores in Q1 FY26, resulting in a negative operating margin of -2.94%. This represents a 620 basis point sequential deterioration and underscores severe cost pressures that the company has been unable to mitigate through pricing or operational efficiencies. Employee costs remained elevated at ₹43.20 crores, representing 14.11% of net sales—a ratio that becomes unsustainable when revenues contract sharply.
Interest costs climbed to ₹7.42 crores from ₹6.45 crores in the previous quarter, reflecting higher debt levels following the company's capital expenditure programme. Depreciation stood at ₹9.96 crores, marginally higher than Q1's ₹9.91 crores. The combination of negative operating profit, elevated interest burden, and steady depreciation resulted in a profit before tax of ₹-24.75 crores. After accounting for a tax benefit of ₹6.57 crores, the company reported a net loss of ₹18.17 crores, translating to a PAT margin of -5.93%.
Operational Challenges: Structural Headwinds Intensify
The operational metrics reveal a company under severe stress. The half-yearly return on capital employed (ROCE) for H1 FY26 stood at -1.79%, marking the lowest level in the company's recent history. This negative return indicates that Everest Industries is destroying shareholder value rather than creating it—a critical red flag for any manufacturing enterprise. The five-year average ROCE of 5.56% already reflected weak capital efficiency, but the recent deterioration suggests fundamental operational challenges rather than cyclical pressures.
Return on equity (ROE) tells a similarly concerning story. The half-yearly ROE for H1 FY26 turned negative at -5.58%, compared to a five-year average of just 4.25%. For context, an ROE below 10% is generally considered weak for manufacturing companies, and negative ROE indicates that the company is eroding shareholder equity through sustained losses. The combination of negative ROCE and negative ROE points to deep-seated issues in both asset utilisation and overall profitability.
Critical Operational Red Flags
ROCE Collapse: Half-yearly ROCE of -1.79% represents the lowest level on record, indicating severe capital inefficiency and value destruction. The company's assets are generating negative returns, a situation unsustainable in the medium term.
Operating Leverage Breakdown: Operating profit to net sales ratio plunged to -6.84% in Q2 FY26, the worst level in recent quarters. The company's inability to maintain positive operating margins despite a mature manufacturing base suggests fundamental competitive or cost structure issues.
Cash Position Deterioration: Cash and cash equivalents for H1 FY26 stood at just ₹8.30 crores, the lowest level in recent periods. This limited liquidity cushion raises concerns about the company's ability to navigate operational challenges without additional debt.
The balance sheet reflects mounting pressures. As of March 2025, long-term debt stood at ₹94.50 crores, more than doubling from ₹44.90 crores in the previous year. This debt increase funded a significant capital expenditure programme, with fixed assets rising to ₹467.83 crores from ₹350.10 crores. However, the return on this incremental capital has been deeply disappointing, with the expanded asset base failing to generate commensurate revenues or profits.
The debt-to-equity ratio for H1 FY26 climbed to 0.54 times, the highest level in recent periods. Whilst not alarming in absolute terms, this leverage becomes concerning when combined with negative profitability and cash flow pressures. The company's debt-to-EBITDA ratio averaged 4.75 times over recent periods, indicating that debt levels are elevated relative to operating cash generation capacity.
Industry Context: Building Materials Sector Under Pressure
Everest Industries operates in the competitive building materials sector, specifically manufacturing fibre-based cement products including roofing sheets, interior panels, and non-asbestos flat sheets. The company faces intense competition from both organised players and the unorganised sector, with pricing power constrained by commodity-like product characteristics in certain segments.
The broader building materials industry has experienced mixed demand trends. Whilst infrastructure spending and urban housing have provided some support, rural demand—a key market for roofing products—has remained subdued due to erratic monsoons and agricultural income pressures. Additionally, raw material costs, particularly for cement and fibre inputs, have exhibited volatility, compressing margins for manufacturers unable to pass through cost increases immediately.
Competitive Dynamics and Market Positioning
Everest Industries' struggles appear more company-specific than sector-wide. The sharp revenue decline of 18.75% year-on-year in Q2 FY26 suggests market share losses or product-specific challenges rather than broad industry weakness. The company's inability to maintain positive operating margins during a period when peer companies have generally sustained profitability points to internal execution issues, potentially including pricing discipline, cost control, or product mix deterioration.
The company's five-year sales growth of 7.10% appears modest but reasonable for a mature building materials manufacturer. However, the five-year EBIT growth of -189.66% reveals a catastrophic profitability trend, with earnings declining precipitously despite revenue growth. This divergence suggests that the company has been unable to leverage scale, has suffered severe margin compression, or has made value-destructive capital allocation decisions.
Peer Comparison: Lagging Across Key Metrics
When compared to peers in the miscellaneous building materials space, Everest Industries' financial metrics highlight its relative weakness. The company's return on equity of 4.25% trails significantly behind better-performing peers, whilst its price-to-book ratio of 1.19x reflects the market's scepticism about future earnings power.
| Company | P/E (TTM) | P/BV (x) | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Everest Industries | NA (Loss Making) | 1.19 | 4.25 | 0.52 | 0.58 |
| Creative Newtech | 15.76 | 3.23 | 20.64 | 0.35 | 0.07 |
| Kokuyo Camlin | 32.24 | 2.64 | 6.78 | -0.04 | — |
| Uniphos Enterprises | 43.93 | 0.29 | 1.10 | 0.00 | 0.42 |
| Linc | 17.29 | 2.78 | 14.63 | -0.01 | 1.32 |
| Repro India | NA (Loss Making) | 1.64 | 0.83 | 0.31 | — |
Everest Industries' loss-making status in the trailing twelve months places it alongside Repro India as the only loss-making entity in this peer group. Creative Newtech, with an ROE of 20.64%, demonstrates what best-in-class performance looks like in this sector—nearly five times Everest Industries' ROE. Even Linc, with an ROE of 14.63%, significantly outperforms Everest Industries whilst maintaining a net cash position (negative debt-to-equity ratio).
The price-to-book ratio of 1.19x for Everest Industries sits below the peer average of approximately 2.10x, reflecting the market's assessment that the company's assets are generating inadequate returns. Whilst a lower P/BV ratio might suggest value in some contexts, in this case it appears to reflect justified pessimism about future profitability rather than an attractive entry point. The company's debt-to-equity ratio of 0.52 is moderate but concerning given the negative profitability trajectory.
Valuation Analysis: Risky Despite Apparent Cheapness
Everest Industries' valuation metrics present a complex picture. With the stock loss-making on a trailing twelve-month basis, the P/E ratio is not meaningful. The price-to-book ratio of 1.19x appears superficially attractive, trading at a modest premium to book value. However, this valuation must be assessed in the context of the company's negative ROE—when a company destroys shareholder value through sustained losses, even a P/BV ratio near 1.0x can represent overvaluation.
The company's enterprise value to EBITDA multiple of 81.17x appears extraordinarily elevated, reflecting the combination of modest EBITDA generation and significant debt. The EV/EBIT ratio is negative at -34.48x, a mathematical artefact of negative EBIT that underscores the severity of operational challenges. The EV/Sales ratio of 0.60x suggests the market values the entire enterprise at approximately 60% of annual revenues—a level that might appear attractive for a profitable, growing business but raises concerns for a loss-making entity.
The company's valuation grade has been classified as "Risky" since February 2025, having previously been downgraded from "Expensive" and "Very Expensive" in late 2024. This classification reflects the market's assessment that the risk-reward profile is unfavourable even at current depressed price levels. The stock's 42.27% decline from its 52-week high of ₹748.00 to the current price of ₹431.85 has not been sufficient to render the valuation compelling given the deteriorating fundamentals.
The dividend yield of 0.58%, based on the latest dividend of ₹2.50 per share (ex-date September 12, 2025), provides minimal income support. More concerning is the dividend payout ratio of -109.73%, indicating that the company paid dividends despite generating losses—a practice that is unsustainable and raises questions about capital allocation discipline. Investors seeking income would find far more attractive opportunities elsewhere, whilst those seeking capital appreciation face the headwind of negative earnings momentum.
Shareholding Pattern: Stable Promoter Holding, Marginal Institutional Interest
The shareholding pattern for Everest Industries reveals a stable promoter base but limited institutional conviction. Promoter holding stood at 50.22% as of December 2025, unchanged from the previous quarter but marginally higher than the 50.15% recorded in March 2025. The promoter entity, Falak Investment Private Limited, holds the entire promoter stake with zero pledging—a positive factor that eliminates concerns about forced selling or financial distress at the promoter level.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 50.22% | 50.22% | 50.15% | 50.15% | 0.00% |
| FII Holding | 10.28% | 10.37% | 10.33% | 10.38% | -0.09% |
| Mutual Fund Holding | 0.03% | 0.03% | 0.03% | 0.03% | 0.00% |
| Other DII Holdings | 0.04% | 0.04% | 0.04% | 0.04% | 0.00% |
| Non-Institutional | 39.42% | 39.34% | 39.45% | 39.40% | +0.08% |
Foreign institutional investor (FII) holding declined marginally to 10.28% in December 2025 from 10.37% in the previous quarter, continuing a gradual downward trend from 10.46% in December 2024. Whilst the sequential changes are small, the direction is clear—foreign investors have been reducing exposure, likely reflecting concerns about the company's deteriorating financial performance and uncertain turnaround prospects.
Mutual fund holding remains negligible at 0.03%, with just two mutual fund schemes holding positions. This minimal institutional ownership from domestic mutual funds signals a lack of conviction among professional investors who conduct deep fundamental analysis. Similarly, insurance company holdings are zero, and other domestic institutional investor (DII) holdings stand at a mere 0.04%. The total institutional holding of approximately 10.35% is remarkably low for a listed company of this market capitalisation, suggesting that sophisticated investors see limited value or excessive risk.
Non-institutional holdings, representing retail and high-net-worth individual investors, account for 39.42% of the equity. This segment increased marginally by 0.08% in the latest quarter, though it's unclear whether this represents fresh buying or simply reflects the reduction in institutional holdings. The absence of meaningful institutional participation leaves the stock vulnerable to volatility and limits liquidity, as retail investors typically exhibit more emotional trading behaviour during periods of stress.
Stock Performance: Severe Underperformance Across All Timeframes
The stock price performance of Everest Industries has been dismal across virtually all timeframes, significantly underperforming both the Sensex and its sector peers. Over the past year, the stock has plunged 34.93% whilst the Sensex gained 7.07%, resulting in negative alpha of -42.00 percentage points. This massive underperformance reflects the market's loss of confidence in the company's ability to return to sustainable profitability.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | -1.58% | +0.32% | -1.90% |
| 1 Week | -0.67% | +1.59% | -2.26% |
| 1 Month | -14.71% | -1.74% | -12.97% |
| 3 Month | -26.05% | +0.32% | -26.37% |
| 6 Month | -17.00% | +3.77% | -20.77% |
| YTD | -17.06% | -1.92% | -15.14% |
| 1 Year | -34.93% | +7.07% | -42.00% |
| 2 Years | -64.41% | +15.78% | -80.19% |
| 3 Years | -40.11% | +38.13% | -78.24% |
The two-year performance is even more sobering, with the stock down 64.41% against a Sensex gain of 15.78%—negative alpha of -80.19 percentage points. This catastrophic underperformance indicates that the company's challenges are not recent but have been building over multiple quarters. The three-year return of -40.11% versus Sensex gains of 38.13% (alpha of -78.24%) confirms that this is a sustained deterioration rather than a temporary setback.
Recent momentum has been particularly weak. The stock declined 26.05% over the past three months and 14.71% in the past month alone, accelerating to the downside as Q2 FY26 results disappointed and investors reassessed the company's turnaround prospects. The year-to-date decline of 17.06% significantly exceeds the Sensex's modest 1.92% decline, highlighting company-specific rather than market-wide pressures.
The stock's beta of 1.50 indicates high volatility relative to the market, with volatility of 42.58% over the past year—nearly four times the Sensex's 11.53% volatility. This elevated volatility, combined with negative returns, results in a deeply negative risk-adjusted return of -0.82 and a negative Sharpe ratio. The stock falls squarely into the "high risk, low return" category—the worst possible combination for investors. All key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day) are above the current price, confirming the bearish technical setup.
Investment Thesis: Multiple Red Flags, Limited Catalysts
The investment thesis for Everest Industries is fundamentally challenged across multiple dimensions. The company's Mojo Score of 22 out of 100 reflects the convergence of negative factors: deteriorating financial trends, bearish technical indicators, risky valuation assessment, and below-average quality metrics. Each of these four pillars of analysis points to significant downside risks with limited upside catalysts visible in the near to medium term.
From a quality perspective, the company has been downgraded to "Below Average" as of November 2025, reflecting sustained weak financial performance. The five-year EBIT growth of -189.66% is particularly alarming, indicating that the company has been destroying earnings power over time despite modest revenue growth. The average ROCE of 5.56% and average ROE of 4.25% are both weak, and recent quarters have seen these metrics turn negative—a clear sign of value destruction.
The financial trend analysis shows a "Negative" classification as of December 2025, with multiple metrics hitting historical lows: quarterly PAT, ROCE, operating profit to interest coverage, cash balances, and net sales all at or near their worst levels. The debt-to-equity ratio has climbed to its highest point, compounding concerns about financial flexibility. The trend had briefly improved to "Flat" in mid-2024 before deteriorating again, suggesting that any stabilisation was temporary rather than sustainable.
Technical indicators uniformly point to continued weakness. The stock entered a "Bearish" trend on December 31, 2025, at ₹513.10, and has since declined a further 15.8% to the current level of ₹431.85. MACD indicators show bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands confirm the bearish trend. The stock trades below all key moving averages, with immediate resistance at the 20-day moving average of ₹431.95 and major resistance at the 100-day moving average of ₹558.44. Immediate support lies at the 52-week low of ₹402.00, just 6.9% below current levels.
Key Strengths & Risk Factors
Limited Strengths
- Stable Promoter Holding: 50.22% promoter stake with zero pledging provides governance stability and eliminates forced selling risk
- Established Brand: Decades-long presence in building materials sector with recognised brand equity in roofing and panel products
- Asset Base: Expanded manufacturing footprint with fixed assets of ₹467.83 crores provides capacity for future growth if demand recovers
- YoY Loss Narrowing: Q2 FY26 loss of ₹18.17 crores represents 55.70% improvement versus ₹41.00 crore loss in Q2 FY25, suggesting some stabilisation
- Sector Tailwinds: Long-term structural demand for building materials driven by urbanisation and infrastructure development
Critical Risk Factors
- Persistent Losses: Negative operating margins of -2.94% in Q2 FY26 indicate fundamental profitability challenges beyond cyclical factors
- Capital Inefficiency: Negative ROCE of -1.79% and negative ROE of -5.58% demonstrate severe value destruction and poor asset utilisation
- Revenue Contraction: 38.86% sequential and 18.75% YoY revenue decline in Q2 FY26 suggest market share losses or demand weakness
- Elevated Leverage: Debt-to-equity ratio of 0.54 times combined with negative profitability raises refinancing and covenant concerns
- Cash Flow Stress: Cash balances at ₹8.30 crores for H1 FY26 represent lowest level, limiting financial flexibility
- Minimal Institutional Support: Just 10.35% institutional holdings signal lack of conviction from professional investors
- Weak Interest Coverage: Operating profit to interest ratio of -2.73 times in Q2 FY26 indicates inability to service debt from operations
- Technical Breakdown: Stock below all moving averages with bearish trend since December 2025 and high volatility of 42.58%
- Unsustainable Dividends: Payout ratio of -109.73% indicates dividends paid despite losses, raising capital allocation concerns
Outlook: Critical Monitoring Points Ahead
The outlook for Everest Industries remains highly uncertain, with the balance of risks tilted decidedly to the downside. The company faces the challenge of restoring operating profitability whilst managing elevated debt levels and limited cash reserves. The path to recovery would require a combination of revenue stabilisation, aggressive cost restructuring, and potentially strategic actions such as asset sales or capital infusion—none of which appear imminent based on available information.
Potential Positive Catalysts
- Return to positive operating margins through pricing discipline or cost reduction initiatives
- Sequential revenue recovery in Q3/Q4 FY26 driven by seasonal demand or market share gains
- Successful commissioning of new capacity additions with improved product mix and margins
- Strategic partnerships or product innovations that enhance competitive positioning
- Improvement in rural demand conditions supporting roofing product sales
Critical Red Flags to Monitor
- Further deterioration in operating margins below -3% indicating worsening competitive position
- Continued sequential revenue declines in Q3 FY26 suggesting structural demand issues
- Cash balances falling below ₹5 crores raising liquidity and refinancing concerns
- Debt-to-equity ratio exceeding 0.60 times without corresponding profitability improvement
- Further reduction in FII holdings below 10% signalling institutional exodus
- Stock breaking below 52-week low of ₹402 triggering technical selling pressure
- Interest coverage remaining negative for another quarter indicating unsustainable debt burden
- Management commentary suggesting further delays in turnaround or capital expenditure plans
Investors should closely monitor the Q3 FY26 results for any signs of stabilisation. Key metrics to watch include sequential revenue trends, operating margin trajectory, cash flow generation, and debt levels. Any sustained improvement in these areas would be necessary (though not sufficient) conditions for considering a more constructive stance. Conversely, continued deterioration would reinforce the case for avoiding or exiting the stock.
The Verdict: Exit Recommended
Score: 22/100
For Fresh Investors: Avoid completely. The combination of negative operating margins, deteriorating returns on capital, elevated debt, and bearish technical setup presents excessive downside risk with no visible near-term catalysts. Better opportunities exist in the building materials sector with companies demonstrating consistent profitability and stronger balance sheets.
For Existing Holders: Consider exiting on any relief rallies. The Q2 FY26 results confirm that operational challenges are deepening rather than stabilising. With the stock trading just 7.43% above its 52-week low and multiple metrics at historical worst levels, the risk of further value erosion remains high. The 0.58% dividend yield provides negligible compensation for the capital risk, and the negative payout ratio suggests dividends may not be sustainable.
Fair Value Estimate: ₹350-380 (19% downside from current levels). This estimate reflects the company's negative earnings power, weak return on equity, and elevated leverage. Until the company demonstrates at least two consecutive quarters of positive operating margins and stabilising revenues, any valuation premium to book value appears unjustified.
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, and all investments carry risk of loss.
