The ₹923.91 crores market capitalisation company saw its stock plunge 4.88% following the results announcement, closing at ₹582.70 on October 30, 2025. With net sales collapsing 38.86% quarter-on-quarter to ₹306.16 crores and operating margins turning deeply negative at -2.94%, the building materials manufacturer faces mounting questions about its ability to navigate challenging market conditions.
The quarter's performance reveals a company grappling with severe operational headwinds. Revenue of ₹306.16 crores marked the lowest quarterly sales figure in recent history, down sharply from ₹500.72 crores in Q1 FY26. Year-on-year, sales declined 18.75% from ₹376.82 crores in Q2 FY24, signalling persistent demand weakness in the building materials sector. The sharp sequential contraction suggests significant seasonality challenges or market share losses that management must urgently address.
Financial Performance: Profitability Crisis Intensifies
The Q2 FY26 results paint a deeply concerning picture of financial deterioration across every profitability metric. Operating profit before depreciation, interest, and tax (PBDIT) excluding other income turned negative at ₹-9.01 crores, a dramatic reversal from the ₹16.39 crores positive PBDIT in Q1 FY26. This translated to an operating margin of -2.94%, compared to +3.27% in the previous quarter and -0.45% in Q2 FY24.
The gross profit margin collapsed to -4.83% from +2.64% in Q1 FY26, indicating severe pricing pressure or cost inflation that the company cannot pass through to customers. PAT margin deteriorated sharply to -5.93% from +0.33% sequentially, reflecting the compounding impact of operating losses, elevated interest costs, and fixed depreciation charges. Interest expense climbed to ₹7.42 crores, the highest quarterly level on record, up from ₹6.45 crores in Q1 FY26, suggesting increased working capital borrowings or higher debt levels to fund operations.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 306.16 | -38.86% | -18.17 | -1,214.72% | -2.94% |
| Jun'25 | 500.72 | +10.62% | 1.63 | -78.66% | 3.27% |
| Mar'25 | 452.63 | +21.99% | 7.64 | -149.35% | 2.28% |
| Dec'24 | 371.03 | -1.54% | -15.48 | +32.65% | -1.50% |
| Sep'24 | 376.82 | -27.86% | -11.67 | -173.35% | -0.45% |
| Jun'24 | 522.34 | +20.88% | 15.91 | +192.46% | 5.14% |
| Mar'24 | 432.11 | — | 5.44 | — | 3.39% |
Employee costs remained relatively stable at ₹43.20 crores, up marginally from ₹39.65 crores in Q1 FY26, but the sharp revenue decline meant employee expenses consumed 14.11% of sales compared to 7.92% in the previous quarter. Depreciation charges of ₹9.96 crores remained consistent with Q1 FY26 levels (₹9.91 crores), reflecting the company's ongoing capital investments even as operational performance deteriorates. Other income provided modest relief at ₹1.65 crores, though this was significantly lower than the ₹3.29 crores recorded in Q1 FY26.
Critical Financial Red Flags
Operating Losses Accelerate: The company recorded its worst operating performance with PBDIT excluding other income at ₹-9.01 crores, marking a dramatic deterioration from consistent profitability in prior quarters. The operating profit to interest coverage ratio collapsed to -1.21 times, indicating the company cannot service its debt obligations from core operations.
Earnings Quality Concerns: With losses mounting and cash flow pressures evident, the sustainability of operations comes into question. The company's tax rate of 26.55% on losses suggests limited ability to utilise tax shields, whilst the dividend payout ratio of -109.73% on annual basis reflects the board's decision to maintain dividends despite losses.
Operational Challenges: Weak Returns on Capital Deployed
Beyond the immediate quarterly distress, Everest Industries faces fundamental challenges in generating adequate returns on invested capital. The company's average return on equity (ROE) over five years stands at just 5.70%, significantly below the cost of equity for most investors and well beneath industry standards for manufacturing businesses. This weak ROE reflects persistent profitability challenges and inefficient capital allocation over an extended period.
The latest ROE for FY25 deteriorated further to -2.37%, indicating the company destroyed shareholder value during the year. Return on capital employed (ROCE) averaged 7.39% over five years, but the latest ROCE for FY25 turned negative at -1.06%, underscoring the severity of operational difficulties. These metrics suggest that despite capital investments—fixed assets increased from ₹350.10 crores in FY24 to ₹467.83 crores in FY25—the company has failed to generate commensurate returns.
Balance Sheet Pressures Mount
The company's balance sheet reveals growing financial stress. Long-term debt surged to ₹94.50 crores in FY25 from ₹44.90 crores in FY24, whilst shareholder funds remained essentially flat at ₹596.61 crores. The debt-to-equity ratio climbed to 0.43, and the average debt-to-EBITDA ratio of 2.28 times indicates moderate but concerning leverage given the company's deteriorating profitability.
Working capital management has become a critical concern. Cash flow from operations turned sharply negative at ₹-90.00 crores in FY25, driven by adverse working capital changes of ₹-147.00 crores. This represents a dramatic reversal from FY24's positive ₹182.00 crores operating cash flow. Closing cash balances plunged to just ₹9.00 crores from ₹63.00 crores, raising questions about liquidity adequacy.
Industry Context: Building Materials Sector Headwinds
The building materials sector has faced significant headwinds through 2025, with demand volatility, raw material cost pressures, and intense competition weighing on manufacturers. Everest Industries' struggles appear more severe than sector-wide challenges, evidenced by its substantial market underperformance. The stock has declined 46.70% over the past year, dramatically underperforming the Sensex's 5.98% gain and the broader Miscellaneous sector's -17.02% return.
The company's sales-to-capital-employed ratio of 2.27 times suggests moderate asset turnover efficiency, but this has proven insufficient to generate acceptable profitability. Five-year sales growth of 7.77% appears reasonable on the surface, but this modest top-line expansion has been accompanied by catastrophic EBIT growth of -204.54% over the same period, indicating severe margin compression and operational inefficiencies that have more than offset revenue gains.
Quality Assessment: Below Average Fundamentals
Everest Industries' overall quality grade stands at "Below Average," downgraded from "Average" in September 2025. This assessment reflects weak long-term financial performance characterised by declining profitability metrics, inadequate returns on capital, and deteriorating operational efficiency. The company's 5-year EBIT growth of -204.54% represents a structural deterioration in earning power that extends beyond cyclical challenges.
Positive factors include zero promoter pledging and adequate interest coverage under normal conditions (7.41 times on average), but these are insufficient to offset fundamental profitability weaknesses. Institutional holdings of just 10.44% suggest limited confidence from sophisticated investors, with FII holdings stable around 10.37% but mutual fund and insurance participation virtually absent.
Peer Comparison: Valuation Reflects Fundamental Weakness
Within the Miscellaneous sector peer group, Everest Industries presents a mixed comparative picture. The company's price-to-book ratio of 1.63 times sits below several peers such as Kokuyo Camlin (3.45x) and Linc (3.27x), but this apparent valuation discount reflects justified concerns about asset quality and earning power rather than an attractive entry point.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield % | Debt/Equity |
|---|---|---|---|---|---|
| Everest Inds. | NA (Loss Making) | 1.63 | 5.70 | 0.41 | 0.43 |
| Kokuyo Camlin | NA (Loss Making) | 3.45 | 5.21 | — | 0.11 |
| Uniphos Enter. | NA (Loss Making) | 0.38 | 1.16 | 0.33 | -0.01 |
| Linc | 20.34 | 3.27 | 12.04 | 1.17 | -0.13 |
| Repro India | NA (Loss Making) | 1.98 | 1.27 | — | 0.23 |
| S Chand & Compan | 11.99 | 0.63 | 3.83 | 2.25 | -0.06 |
Everest Industries' ROE of 5.70% ranks amongst the higher performers in this peer set, though this average masks the recent deterioration to negative territory. The company's dividend yield of 0.41% lags peers like S Chand & Company (2.25%) and Linc (1.17%), reflecting both the company's financial stress and the unsustainability of current payout levels given negative earnings. With a market capitalisation of ₹923.91 crores, Everest Industries ranks third in this peer group, but size provides limited competitive advantage given operational challenges.
Valuation Analysis: Risk Premium Embedded in Current Price
Current valuation metrics reflect the market's deep scepticism about Everest Industries' prospects. The stock trades at a price-to-book value of 1.63 times, representing a 63% premium to book value despite negative earnings and deteriorating fundamentals. This valuation appears excessive given the company's demonstrated inability to generate acceptable returns on book value, with the latest ROE at -2.37%.
The EV/EBITDA multiple of 63.15 times appears extraordinarily high, though this largely reflects the denominator effect of minimal EBITDA generation rather than genuine valuation richness. EV/Sales of 0.72 times suggests the market values the entire enterprise at less than one year's revenue, which typically indicates either deep value or fundamental concerns about business viability. In Everest Industries' case, the latter interpretation appears more appropriate.
The stock's valuation grade has deteriorated from "Fair" in August 2023 to "Risky" currently, having passed through "Very Expensive" and "Expensive" classifications. This progression reflects both the company's financial deterioration and the market's gradual repricing of risk. At current levels of ₹582.70, the stock trades 51.04% below its 52-week high of ₹1,190.10, but 38.34% above its 52-week low of ₹421.20, suggesting significant volatility and uncertainty about fair value.
Shareholding Pattern: Stable Promoter Base, Limited Institutional Interest
The shareholding pattern reveals a stable promoter base with minimal institutional participation. Promoter holding increased marginally to 50.22% in September 2025 from 50.15% in the previous quarter, with Falak Investment Private Limited holding the entire promoter stake. This stability provides some governance comfort, though the lack of promoter share purchases despite the stock's decline suggests limited conviction about near-term recovery prospects.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % | Non-Inst % |
|---|---|---|---|---|---|---|
| Sep'25 | 50.22 | 10.37 | 0.03 | 0.00 | 0.04 | 39.34 |
| Jun'25 | 50.15 | 10.33 | 0.03 | 0.00 | 0.04 | 39.45 |
| Mar'25 | 50.15 | 10.38 | 0.03 | 0.00 | 0.04 | 39.40 |
| Dec'24 | 50.15 | 10.46 | 0.03 | 0.00 | 0.02 | 39.35 |
| Sep'24 | 50.15 | 10.49 | 0.03 | 0.00 | 0.00 | 39.34 |
Foreign institutional investor (FII) holdings have remained remarkably stable around 10.37%, with only marginal quarterly fluctuations. The presence of 18 FII holders suggests some diversified international interest, though the aggregate stake remains modest. Mutual fund participation is virtually non-existent at 0.03% across just two funds, whilst insurance companies hold no stake whatsoever. This absence of domestic institutional support reflects the company's below-average quality grade and deteriorating fundamentals.
Non-institutional investors comprise 39.34% of the shareholding base, representing retail and high-net-worth individual participation. The slight sequential decline of 0.11% in September 2025 suggests some retail investor exits following disappointing quarterly results. The lack of institutional buying despite the stock's significant decline from highs indicates professional investors remain unconvinced about the turnaround thesis.
Stock Performance: Severe Underperformance Across All Timeframes
Everest Industries' stock performance has been catastrophic across most meaningful timeframes, with particularly severe underperformance versus both the broader Sensex and its sector peers. The stock has declined 46.70% over the past year, massively underperforming the Sensex's 5.98% gain by 52.68 percentage points of negative alpha. This represents one of the worst relative performances in the building materials space.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -11.64% | +0.20% | -11.84% |
| 1 Month | -13.73% | +5.55% | -19.28% |
| 3 Month | +7.28% | +3.98% | +3.30% |
| 6 Month | +17.55% | +5.58% | +11.97% |
| YTD | -24.98% | +8.43% | -33.41% |
| 1 Year | -46.70% | +5.98% | -52.68% |
| 2 Years | -50.21% | +32.15% | -82.36% |
| 3 Years | -33.08% | +41.30% | -74.38% |
| 5 Years | +163.55% | +113.87% | +49.68% |
Recent performance has been particularly brutal, with the stock down 11.64% over the past week and 13.73% over the past month, whilst the Sensex posted gains during both periods. Year-to-date, the stock has declined 24.98% compared to the Sensex's 8.43% gain, representing 33.41 percentage points of underperformance. The two-year and three-year returns show similar patterns of severe underperformance, with negative alpha of 82.36% and 74.38% respectively.
Interestingly, the longer five-year view shows positive returns of 163.55%, outperforming the Sensex by 49.68 percentage points. This suggests the company enjoyed a period of stronger operational performance in earlier years, but the recent deterioration has destroyed much of this value creation. The stock's beta of 1.50 indicates high volatility relative to the market, with volatility of 43.60% marking it as a high-risk investment. The risk-adjusted return of -1.07 over the past year confirms poor performance even after accounting for elevated volatility.
Investment Thesis: Multiple Negative Signals Converge
The investment thesis for Everest Industries has deteriorated significantly, with the company's proprietary Mojo Score standing at just 24 out of 100—firmly in "Strong Sell" territory. This score reflects the convergence of multiple negative factors: deteriorating financial trends, below-average quality metrics, risky valuation despite recent declines, and severe market underperformance.
The financial trend classification of "Negative" reflects multiple concerning developments in Q2 FY26: net profit at its lowest level, operating profit-to-interest coverage at historic lows, net sales at multi-quarter lows, and interest expenses at historic highs. The quality grade of "Below Average" stems from weak long-term fundamentals including negative EBIT growth over five years, inadequate returns on capital, and deteriorating profitability metrics.
Technical indicators provide the only moderately positive signal, with the stock classified as "Mildly Bullish" on weekly timeframes. However, this must be viewed in context of the stock trading well below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), suggesting any technical strength may prove ephemeral without fundamental improvement. Monthly technical indicators remain bearish across most parameters including MACD, Bollinger Bands, and KST oscillator.
Key Strengths & Risk Factors
Key Strengths ✓
- Established Market Position: Long operating history in fibre-based cement products with established distribution networks and brand recognition in building materials sector.
- Zero Promoter Pledging: Clean promoter shareholding with no pledged shares provides governance comfort and eliminates forced-sale risks during market volatility.
- Stable Promoter Base: Consistent 50%+ promoter holding through Falak Investment provides ownership stability, though lack of share purchases during decline raises questions.
- Capital Investment Commitment: Fixed assets increased from ₹350.10 crores to ₹467.83 crores in FY25, indicating management's continued investment in capacity despite near-term challenges.
- Modest Leverage Historically: Average debt-to-equity of 0.43 and net debt-to-equity of 0.43 remain manageable levels, providing some financial flexibility for turnaround efforts.
- Dividend Commitment: Recent dividend of ₹2.50 per share (ex-date September 12, 2025) demonstrates board's confidence in maintaining shareholder returns despite losses.
Key Concerns ⚠
- Severe Profitability Crisis: Q2 FY26 net loss of ₹18.17 crores with negative operating margins of -2.94% indicates fundamental business model stress requiring urgent correction.
- Revenue Collapse: 38.86% QoQ revenue decline to ₹306.16 crores suggests severe demand weakness, market share losses, or seasonality issues management has failed to address.
- Inadequate Returns on Capital: Five-year average ROE of 5.70% and latest ROE of -2.37% demonstrate persistent inability to generate acceptable shareholder returns.
- Deteriorating Cash Generation: Operating cash flow turned negative at ₹-90.00 crores in FY25 with closing cash of just ₹9.00 crores raises serious liquidity concerns.
- Rising Interest Burden: Interest expenses at record ₹7.42 crores in Q2 FY26 with negative operating profit creates unsustainable debt servicing dynamics.
- Structural Margin Compression: Five-year EBIT growth of -204.54% indicates long-term deterioration in earning power beyond cyclical factors.
- Absence of Institutional Support: Minimal mutual fund (0.03%) and zero insurance holdings reflect sophisticated investors' lack of confidence in turnaround prospects.
- Severe Market Underperformance: 46.70% one-year decline with 52.68 percentage points of negative alpha versus Sensex demonstrates market's deep scepticism about recovery.
Outlook: What Lies Ahead for Everest Industries
The outlook for Everest Industries remains deeply challenging, with the company facing a critical juncture that will determine its long-term viability. Management must urgently address the operational inefficiencies driving negative margins whilst simultaneously managing cash flow pressures and elevated debt servicing requirements. The absence of any turnaround commentary or strategic initiatives announced alongside these results raises questions about management's plan to arrest the deterioration.
Positive Catalysts to Monitor
- Margin Recovery: Any evidence of operating margin improvement back towards historical 3-5% levels would signal stabilisation of core business economics.
- Revenue Stabilisation: Sequential revenue growth in Q3 FY26 would alleviate concerns about sustained demand weakness and market share losses.
- Cost Restructuring: Announced initiatives to reduce fixed cost base or improve operational efficiency could restore path to profitability.
- Working Capital Improvement: Positive operating cash flow and reduced working capital intensity would ease immediate liquidity pressures.
- Strategic Initiatives: New product launches, market expansion, or operational partnerships could provide growth catalysts beyond current struggling operations.
Red Flags Requiring Attention
- Further Revenue Declines: Continued sequential sales deterioration would suggest structural demand issues beyond seasonal factors requiring drastic action.
- Sustained Operating Losses: Multiple quarters of negative EBITDA would raise existential questions about business model viability and debt covenant compliance.
- Liquidity Crisis: Further cash balance deterioration or inability to secure additional working capital facilities could trigger distressed scenarios.
- Covenant Breaches: Violation of debt covenants related to interest coverage or leverage ratios could accelerate repayment obligations or trigger defaults.
- Management Departures: Key executive exits would signal internal concerns about turnaround feasibility and create additional uncertainty for stakeholders.
- Institutional Exits: Further reduction in already-minimal FII holdings would eliminate remaining professional investor support and pressure valuations.
"With operating losses mounting, cash flows negative, and no clear turnaround strategy articulated, Everest Industries faces an urgent imperative to restore profitability or risk a spiral into deeper financial distress."
The building materials sector outlook remains mixed, with infrastructure spending providing some support but residential construction facing headwinds. For Everest Industries specifically, the company must demonstrate operational improvement in the coming quarters to rebuild investor confidence. The technical indicators suggesting mild bullishness appear disconnected from fundamental realities and should not be relied upon as investment signals without corresponding operational evidence.
The Verdict: Exit Recommended on Mounting Operational Distress
Score: 24/100
For Fresh Investors: Avoid initiation entirely. The company faces severe operational challenges with negative margins, deteriorating cash flows, and no articulated turnaround strategy. The 51% decline from 52-week highs does not represent value but rather appropriate risk repricing given fundamental deterioration. Wait for sustained evidence of margin recovery and positive cash generation before considering entry.
For Existing Holders: Strongly consider exiting positions to preserve capital. The Q2 FY26 results represent a significant deterioration from already-weak prior quarters, with revenue collapse and mounting losses indicating accelerating distress. With operating cash flows negative, debt servicing challenging, and minimal institutional support, the risk-reward profile has turned decidedly unfavourable. Any technical strength should be used as an opportunity to exit rather than add positions.
Fair Value Estimate: ₹420-450 range (28-33% downside from current levels), reflecting justified concerns about business model sustainability and need for significant operational restructuring before company can command premium valuations.
Rationale: The convergence of negative financial trends, below-average quality metrics, severe market underperformance, and absence of turnaround catalysts creates an unfavourable investment proposition. Until management demonstrates ability to restore positive margins and cash generation, the stock remains uninvestable despite recent declines.
