The quarter-on-quarter comparison reveals equally disturbing trends: net profit collapsed 183% from Q1 FY26's ₹2.59 crores, whilst revenue declined 10.60% to ₹15.10 crores. Operating margins turned sharply negative at -9.47%, a stark deterioration from Q1's 11.60% and Q2 FY25's 15.47%. The company's inability to maintain profitability amidst declining sales volumes raises fundamental questions about operational efficiency and market positioning in an increasingly competitive bearings sector.
The bearings manufacturer's performance represents one of its weakest quarters in recent history, with net sales of ₹15.10 crores marking the lowest quarterly revenue figure in over two years. This dramatic contraction occurred despite the company maintaining a debt-free balance sheet with net cash of ₹11 crores, suggesting the challenges are operational rather than financial in nature. The stock's current trading price of ₹771 represents a 45.78% decline from its 52-week high of ₹1,421.90, though it remains 28.28% above the 52-week low of ₹601.05.
Financial Performance: A Quarter of Severe Deterioration
Galaxy Bearings' Q2 FY26 results reveal a company struggling with multiple operational headwinds. Net sales of ₹15.10 crores represent a sharp 57.99% year-on-year decline and a 10.60% quarter-on-quarter contraction, bringing revenue to its lowest level since December 2024. The operating profit before depreciation, interest, and tax (excluding other income) turned deeply negative at ₹-1.43 crores, compared to a positive ₹5.56 crores in Q2 FY25 and ₹1.96 crores in Q1 FY26.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 15.10 | 16.89 | 35.94 | ▼ 10.60% | ▼ 57.99% |
| Operating Profit (₹ Cr) | -1.43 | 1.96 | 5.56 | ▼ 173% | ▼ 126% |
| Operating Margin (%) | -9.47% | 11.60% | 15.47% | ▼ 2,107 bps | ▼ 2,494 bps |
| Net Profit (₹ Cr) | -2.15 | 2.59 | 4.73 | ▼ 183% | ▼ 145% |
| PAT Margin (%) | -14.24% | 15.33% | 13.16% | ▼ 2,957 bps | ▼ 2,740 bps |
The margin compression tells a troubling story. Operating margins collapsed from a healthy 15.47% in Q2 FY25 to a deeply negative -9.47% in the latest quarter, representing a deterioration of 2,494 basis points. This suggests severe challenges in cost management, pricing power, or both. The gross profit margin similarly deteriorated to -13.31% from 19.76% year-on-year, indicating fundamental issues with either raw material costs or production efficiency.
Other income, which had provided a cushion of ₹1.79 crores in Q2 FY25, turned marginally negative at ₹-0.03 crores in Q2 FY26, removing a critical buffer that had previously supported profitability. Interest costs, whilst remaining modest at ₹0.55 crores, increased 120% year-on-year, suggesting some working capital pressure despite the company's overall debt-free status. The effective tax rate of 11.52% reflects the loss-making nature of the quarter, with the company booking a tax credit of ₹0.28 crores.
Critical Concern: Structural or Cyclical?
The severity of Galaxy Bearings' quarterly loss raises fundamental questions about whether the company faces temporary cyclical headwinds or more permanent structural challenges. The 57.99% year-on-year revenue decline far exceeds normal industry cyclicality, suggesting potential market share loss, customer concentration issues, or sector-specific demand destruction. With operating margins turning sharply negative, the company's ability to return to profitability hinges on either a dramatic revenue recovery or substantial cost restructuring—neither of which appears imminent based on current trends.
Quarterly Trend Analysis: Consistent Deterioration
Examining the trailing twelve-month performance reveals a company in steady decline. After posting relatively healthy results through FY24, Galaxy Bearings began experiencing significant headwinds from Q1 FY25 onwards. The company's best quarter in recent history was March 2025, when it delivered ₹29.95 crores in revenue with a 21.97% operating margin and ₹4.14 crores in net profit. However, subsequent quarters have seen progressive deterioration.
| Quarter | Revenue (₹ Cr) | Operating Margin (%) | Net Profit (₹ Cr) | PAT Margin (%) |
|---|---|---|---|---|
| Sep'25 (Q2 FY26) | 15.10 | -9.47% | -2.15 | -14.24% |
| Jun'25 (Q1 FY26) | 16.89 | 11.60% | 2.59 | 15.33% |
| Mar'25 (Q4 FY25) | 29.95 | 21.97% | 4.14 | 13.82% |
| Dec'24 (Q3 FY25) | 15.58 | 24.58% | 1.53 | 9.82% |
| Sep'24 (Q2 FY25) | 35.94 | 15.47% | 4.73 | 13.16% |
| Jun'24 (Q1 FY25) | 22.75 | 14.07% | 3.32 | 14.59% |
| Mar'24 (Q4 FY24) | 38.97 | 19.19% | 6.12 | 15.70% |
| Dec'23 (Q3 FY24) | 25.98 | 19.98% | 5.05 | 19.44% |
The data reveals significant quarterly volatility, with revenue swinging between ₹15.10 crores and ₹38.97 crores over the past eight quarters. This inconsistency suggests either lumpy order patterns, customer concentration risks, or seasonal factors that management has not adequately communicated. Notably, operating margins have ranged from -9.47% to 24.58%, indicating substantial operational leverage—both positive and negative—depending on revenue levels.
Balance Sheet Strength: A Silver Lining
Despite the operational challenges, Galaxy Bearings maintains a relatively healthy balance sheet. As of March 2024, shareholder funds stood at ₹93.23 crores, comprising ₹3.18 crores in share capital and ₹90.05 crores in reserves. The company carries zero long-term debt and maintains a net cash position of approximately ₹11 crores, providing a crucial buffer during this period of operational stress.
Return on Equity (ROE), whilst still respectable at 12.17% for the latest quarter, has declined from the five-year average of 18.89%, reflecting the recent profit deterioration. This metric indicates the company is generating adequate returns on shareholder capital over the medium term, though the trajectory is concerning. Return on Capital Employed (ROCE) of 16.59% similarly trails the five-year average of 25.19%, suggesting diminishing capital efficiency.
The company's current assets of ₹60.23 crores (as of March 2024) comfortably exceed current liabilities of ₹30.90 crores, providing a current ratio of approximately 1.95—indicating adequate short-term liquidity. Trade payables of ₹14.15 crores and other current liabilities of ₹1.29 crores appear manageable given the company's cash position. Fixed assets of ₹11.47 crores represent the company's manufacturing infrastructure, which has remained relatively stable over recent years.
Financial Strength Indicators
Debt-Free Status: Galaxy Bearings operates with zero long-term debt and a net cash position of ₹11 crores, providing financial flexibility to navigate the current downturn. The company's interest coverage ratio of 15.24x (average) demonstrates its ability to service even modest debt obligations comfortably. However, this financial strength must be balanced against deteriorating operational performance that could erode cash reserves if losses persist.
Peer Comparison: Relative Positioning in the Bearings Sector
Galaxy Bearings' performance must be contextualised within the broader bearings industry, which has faced significant headwinds. The stock's one-year decline of 40.46% actually outperforms the bearings sector's catastrophic 69.91% decline, suggesting that whilst Galaxy faces challenges, the entire sector is experiencing severe stress. This 29.45% relative outperformance provides some comfort that company-specific issues may not be the sole driver of poor returns.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt to Equity |
|---|---|---|---|---|
| Galaxy Bearings | 19.22 | 2.34 | 12.17 | -0.03 |
| L. T. Elevator | 78.27 | — | — | 0.00 |
| Cryogenic OGS | 45.49 | 5.54 | 12.18 | -0.53 |
| Century Extrus. | 23.73 | 2.82 | 11.88 | 0.39 |
From a valuation perspective, Galaxy's P/E ratio of 19.22x appears reasonable compared to peers like L. T. Elevator (78.27x) and Cryogenic OGS (45.49x), though it trades at a premium to Century Extrusions (23.73x). The company's Price-to-Book ratio of 2.34x sits comfortably between peers, suggesting the market is pricing in moderate growth expectations. Galaxy's ROE of 12.17% aligns closely with Cryogenic OGS (12.18%) and Century Extrusions (11.88%), indicating comparable capital efficiency within the peer group.
The debt-free status shared by most peers suggests conservative financial management is an industry norm, likely reflecting the capital-intensive and cyclical nature of the bearings business. Galaxy's negative debt-to-equity ratio of -0.03 (indicating net cash) provides a competitive advantage during downturns, as the company can weather losses without financial distress.
Valuation Analysis: Fair Price Masks Operational Risks
At the current price of ₹771, Galaxy Bearings trades at a P/E ratio of 19.22x trailing twelve-month earnings, which appears fair relative to the company's historical performance and peer group. The Price-to-Book ratio of 2.34x suggests the market values the company at more than double its net asset value, implying expectations of future profitability that recent results call into question.
The company's enterprise value to EBITDA multiple of 13.77x and EV/Sales ratio of 2.51x indicate moderate valuations, though these metrics may prove misleading given the recent negative EBITDA in Q2 FY26. With a market capitalisation of ₹245 crores and book value per share of ₹293.17, the stock trades at approximately 2.6x book value—a premium that requires sustained profitability to justify.
"Galaxy Bearings' valuation appears fair on traditional metrics, but operational deterioration raises questions about whether current multiples adequately reflect execution risks and sector headwinds."
The stock's 45.78% decline from its 52-week high of ₹1,421.90 reflects significant market pessimism, whilst the 28.28% premium to the 52-week low of ₹601.05 suggests some investors see value at current levels. The valuation grade recently shifted to "Fair" from "Very Attractive" on 16 October 2025, indicating the market's reassessment of risk-reward dynamics following the weak results.
Shareholding Pattern: Stable Base Amidst Turbulence
Galaxy Bearings' shareholding structure reveals a relatively stable ownership base, though with minimal institutional participation. Promoter holding stood at 45.88% as of September 2025, declining marginally by 0.37 percentage points from 46.25% in the previous quarter. This minor reduction could reflect estate planning or portfolio rebalancing rather than a loss of confidence, though any promoter selling warrants close monitoring.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 45.88% | 46.25% | 46.25% | ▼ 0.37% |
| FII Holding | 0.27% | 0.27% | 0.27% | — |
| Mutual Fund Holding | 0.00% | 0.00% | 0.00% | — |
| Insurance Holdings | 0.00% | 0.00% | 0.00% | — |
| Other DII Holdings | 0.36% | 0.36% | 0.36% | — |
| Non-Institutional | 53.50% | 53.12% | 53.12% | ▲ 0.38% |
The complete absence of mutual fund holdings and negligible insurance company participation (0.00%) signals limited institutional confidence in the stock. Foreign Institutional Investors (FIIs) maintain a token 0.27% stake, unchanged for multiple quarters, suggesting neither conviction nor active divestment. Other domestic institutional investors hold 0.36%, reflecting minimal professional investor interest.
Non-institutional shareholders constitute 53.50% of the equity base, increasing slightly by 0.38 percentage points quarter-on-quarter. The number of non-institutional shareholders decreased from 11,258 to 10,860, indicating some retail investor exits despite the marginal increase in aggregate holdings. Positively, promoters have zero pledged shares, eliminating concerns about forced selling or financial distress at the promoter level.
Stock Performance: Severe Underperformance Across Timeframes
Galaxy Bearings' stock has experienced brutal underperformance across virtually all timeframes. The one-day decline of 2.97% following the results announcement extended a troubling trend, with the stock down 8.23% over one week and 11.18% over one month. The three-month return of -16.38% significantly trails the Sensex's 4.07% gain, producing negative alpha of 20.45 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -8.23% | +0.49% | -8.72% |
| 1 Month | -11.18% | +5.41% | -16.59% |
| 3 Months | -16.38% | +4.07% | -20.45% |
| 6 Months | +9.96% | +7.03% | +2.93% |
| YTD | -26.77% | +8.50% | -35.27% |
| 1 Year | -40.46% | +6.77% | -47.23% |
| 2 Years | -49.14% | +32.92% | -82.06% |
| 3 Years | -24.57% | +41.87% | -66.44% |
The year-to-date decline of 26.77% against the Sensex's 8.50% gain produces negative alpha of 35.27 percentage points, placing Galaxy in the fourth quartile (bottom 25%) of performers. The one-year return of -40.46% versus the Sensex's 6.77% gain represents catastrophic underperformance, with negative alpha of 47.23 percentage points. The two-year and three-year returns paint an even grimmer picture, with losses of 49.14% and 24.57% respectively whilst the broader market delivered strong gains.
Interestingly, the six-month return of 9.96% slightly outpaced the Sensex's 7.03% gain, producing positive alpha of 2.93 percentage points. This suggests the stock experienced a temporary recovery period earlier in 2025 before recent results triggered renewed selling pressure. The stock's beta of 1.50 indicates high volatility, with movements typically 50% larger than the broader market—amplifying both gains and losses.
From a technical perspective, Galaxy Bearings trades below all major moving averages: 5-day (₹809.44), 20-day (₹841.66), 50-day (₹874.25), 100-day (₹899.58), and 200-day (₹854.95). This alignment of moving averages in descending order confirms a strong downtrend. The technical trend is classified as "Mildly Bearish" as of 22 September 2025, with MACD and KST indicators both bearish on weekly and monthly timeframes.
Investment Thesis: Quality Meets Execution Challenges
Galaxy Bearings presents a paradoxical investment case: a company with solid long-term fundamentals facing severe near-term execution challenges. The company's quality grade remains "Good," supported by a debt-free balance sheet, five-year sales growth of 14.91%, and respectable historical returns on capital. However, the financial trend has deteriorated sharply to "Very Negative" following the Q2 FY26 loss, whilst the technical trend remains "Mildly Bearish."
The valuation appears "Fair" at current levels, with a P/E of 19.22x and P/BV of 2.34x—neither cheap nor expensive relative to peers and historical norms. This fair valuation provides limited margin of safety should operational challenges persist. The company's Mojo Score of 36 out of 100 places it firmly in "SELL" territory, reflecting the combination of weak momentum, deteriorating fundamentals, and technical weakness.
Key Strengths ✓
- Debt-Free Balance Sheet: Zero long-term debt with ₹11 crores net cash provides financial flexibility to navigate downturns without distress
- Strong Historical Growth: Five-year sales CAGR of 14.91% demonstrates ability to grow during favourable conditions
- Solid Capital Efficiency: Five-year average ROCE of 25.19% and ROE of 18.89% indicate historically strong returns on invested capital
- No Promoter Pledging: Zero pledged shares eliminates governance concerns and forced selling risks
- Relative Sector Outperformance: One-year decline of 40.46% outperforms bearings sector's 69.91% crash by 29.45 percentage points
- Adequate Liquidity: Current ratio of approximately 1.95 ensures short-term obligations can be met comfortably
Key Concerns ⚠
- Quarterly Loss: Net loss of ₹2.15 crores in Q2 FY26 represents a 145% year-on-year decline from ₹4.73 crores profit
- Revenue Collapse: Sales of ₹15.10 crores down 57.99% year-on-year indicates severe demand destruction or market share loss
- Negative Operating Margins: Operating margin of -9.47% versus 15.47% last year suggests fundamental cost structure issues
- Minimal Institutional Ownership: Zero mutual fund holdings and 0.27% FII stake signals lack of professional investor confidence
- High Volatility: Beta of 1.50 and 50.63% volatility creates significant risk for investors during downturns
- Technical Weakness: Trading below all major moving averages with bearish MACD and KST indicators suggests further downside risk
- Deteriorating ROE: Current ROE of 12.17% trails five-year average of 18.89%, indicating declining capital efficiency
Outlook: What to Watch
Galaxy Bearings' path forward depends critically on its ability to stabilise revenues and restore profitability. The company's financial strength provides a runway to weather short-term challenges, but sustained losses would erode this buffer. Investors should monitor several key indicators to assess whether the company can execute a turnaround or faces prolonged difficulties.
Positive Catalysts
- Revenue Stabilisation: Quarterly sales returning above ₹25 crores would signal demand recovery
- Margin Recovery: Operating margins returning to positive territory and approaching 10%+ historical levels
- Sector Recovery: Broader bearings industry showing signs of demand improvement
- Order Book Growth: New customer wins or increased orders from existing clients
Red Flags
- Continued Losses: Another quarter of negative profitability would suggest structural rather than cyclical issues
- Further Revenue Decline: Sales falling below ₹15 crores would indicate accelerating deterioration
- Cash Burn: Operating cash flow turning negative would erode the balance sheet cushion
- Promoter Selling: Any further reduction in promoter holdings beyond recent 0.37% decline
The Verdict: Avoid Until Operational Stability Returns
Score: 36/100
For Fresh Investors: Avoid initiating positions until the company demonstrates at least two consecutive quarters of positive profitability and revenue stabilisation above ₹25 crores. The current operational deterioration presents excessive risk despite the debt-free balance sheet. Wait for concrete evidence of turnaround execution before considering entry.
For Existing Holders: Consider reducing positions or exiting entirely, particularly if you lack conviction in management's ability to navigate current challenges. The combination of negative margins, declining revenues, and bearish technical indicators suggests further downside risk. Only long-term investors with high risk tolerance should consider holding through this difficult period.
Fair Value Estimate: ₹650-700 (15-20% downside risk from current levels), assuming operational stabilisation within two quarters. Further deterioration could push fair value below ₹600, approaching the 52-week low.
⚠️ 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.
