The quarter represents a dramatic reversal from Q1 FY26, when the company had posted a profit of ₹0.54 crores on revenues of ₹1.24 crores. The complete absence of sales in Q2 FY26 raises serious questions about the company's operational continuity and business model sustainability. With operating losses mounting and no revenue generation, Hemang Resources faces an uncertain path forward in an already challenging trading and distribution sector.
Financial Performance: A Quarter of Complete Operational Standstill
The Q2 FY26 results reveal a company in operational paralysis. Net sales collapsed to zero from ₹1.24 crores in the previous quarter, marking a 100.00% quarter-on-quarter decline. Year-on-year comparison is equally stark, with revenues down 100.00% from ₹0.96 crores in Q2 FY25. This represents not merely a slowdown but a complete cessation of trading activities during the quarter.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|
| Sep'25 | 0.00 | -100.00% | -0.22 | 0.0% |
| Jun'25 | 1.24 | -83.53% | 0.54 | 43.55% |
| Mar'25 | 7.53 | N/A | 0.77 | 10.23% |
| Dec'24 | 0.00 | -100.00% | 0.29 | 0.0% |
| Sep'24 | 0.96 | +209.68% | -0.32 | -33.33% |
| Jun'24 | 0.31 | -95.51% | -0.20 | -64.52% |
| Mar'24 | 6.91 | N/A | 12.35 | 178.73% |
The company's operating profit before depreciation, interest, and tax (excluding other income) stood at -₹0.24 crores in Q2 FY26, compared to -₹0.23 crores in the previous quarter. Employee costs remained relatively stable at ₹0.08 crores, down marginally from ₹0.10 crores in Q1 FY26. Other income provided minimal support at ₹0.02 crores, a dramatic decline from ₹0.77 crores in the preceding quarter. The absence of any revenue-generating activities meant the company recorded a pre-tax loss of ₹0.22 crores, with no tax liability due to the loss position.
Operational Challenges: Erratic Revenue Pattern Raises Red Flags
A deeper examination of Hemang Resources' quarterly performance over the past two years reveals a deeply troubling pattern of revenue volatility and operational inconsistency. The company has posted zero revenues in three of the last seven quarters (Q2 FY26, Q4 FY25, and Q3 FY25), interspersed with quarters of modest activity. This erratic pattern suggests fundamental challenges in maintaining consistent business operations rather than seasonal variations or cyclical industry trends.
Critical Operational Concerns
Revenue Volatility: Zero revenue quarters alternating with low-activity periods indicate severe operational instability. The company's inability to sustain consistent trading activities raises questions about supplier relationships, working capital management, and overall business viability.
Return on Equity Trajectory: While the average ROE stands at 26.94%, the latest ROE has plummeted to just 5.21%, reflecting deteriorating capital efficiency. The company's ROCE turned negative at -0.52% in the latest period, down dramatically from an already weak average of -33.65%.
The balance sheet as of March 2025 shows shareholder funds of ₹25.96 crores, supported by share capital of ₹13.20 crores and reserves of ₹12.76 crores. Current assets stood at ₹48.68 crores, while current liabilities amounted to ₹20.90 crores, resulting in a working capital position of ₹27.78 crores. However, the company's trade payables of ₹19.64 crores remain nearly unchanged from the previous year, suggesting limited trading activity even during periods when some revenues were recorded. Long-term debt is minimal at ₹0.71 crores, providing some comfort on the leverage front with a debt-to-equity ratio of just 0.02.
Industry Context: Struggling in a Challenging Sector
The trading and distribution sector has faced headwinds over the past year, with the industry posting a negative return of 20.86% over the 12-month period ending November 2025. Hemang Resources has slightly underperformed this already weak sector benchmark, delivering a return of -21.82%, representing an underperformance of 0.96 percentage points. This suggests the company's challenges are both sector-specific and company-specific in nature.
The micro-cap segment, where Hemang Resources operates with a market capitalisation of just ₹29.00 crores, is particularly vulnerable to liquidity constraints and operational disruptions. The company's average daily trading volume of just 101 shares reflects extremely limited investor interest and poor stock liquidity. This thin trading makes the stock highly susceptible to sharp price movements on minimal volume, as evidenced by the current bearish trend that began on November 14, 2025.
Sector Positioning & Competitive Landscape
Hemang Resources operates in a fragmented trading and distribution space dominated by larger, better-capitalised players. The company's inability to maintain consistent revenue generation puts it at a significant competitive disadvantage. Unlike peers who can leverage scale, established supplier networks, and diversified product portfolios, Hemang Resources appears to lack the operational infrastructure necessary for sustained business activity.
Peer Comparison: Valuation Disconnect from Fundamentals
A comparison with sector peers reveals Hemang Resources trading at metrics that appear disconnected from its operational reality. While the company's P/E ratio of 20.95x appears reasonable compared to the industry average of 32x, this valuation multiple is based on historical earnings that included exceptional gains and does not reflect current operational losses.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity |
|---|---|---|---|---|
| Hemang Resources | 20.95 | 1.09 | 26.94% | 0.02 |
| Vaxfab Enterprises | 4.69 | 2.58 | 12.51% | 0.41 |
| Lesha Industries | 73.97 | 0.40 | 1.92% | -0.01 |
| Asian Tea & Exports | 65.49 | 0.40 | 2.68% | 0.15 |
| Kabsons Industries | 35.37 | 1.89 | 13.60% | -0.06 |
| Chandra Prakash Intl | NA (Loss Making) | 0.61 | 19.05% | 1.16 |
Hemang Resources' historical ROE of 26.94% appears superior to most peers, but this metric is heavily influenced by exceptional gains recorded in FY2024 (particularly the ₹12.35 crores profit in Q4 FY24, which included ₹10.25 crores of other income). The latest ROE of 5.21% provides a more realistic picture of current profitability, placing the company below several peers. The price-to-book value of 1.09x suggests the market is pricing the stock slightly above book value despite operational challenges, indicating potential downside risk if losses continue.
Valuation Analysis: Premium Unjustified by Current Performance
At the current price of ₹21.50, Hemang Resources trades at a book value of ₹19.67 per share, representing a price-to-book multiple of 1.09x. This premium to book value appears difficult to justify given the company's zero revenue generation in the latest quarter and history of operational inconsistency. The valuation grade has been classified as "RISKY" since August 2023, a designation that appears increasingly appropriate given recent performance trends.
The stock has declined 37.81% from its 52-week high of ₹34.57, reached earlier in the fiscal year. Current trading at ₹21.50 represents just 7.50% above the 52-week low of ₹20.00, suggesting limited downside cushion. The enterprise value metrics appear distorted due to negative EBITDA, with EV/EBITDA at -29.57x reflecting the company's loss-making status. Given the absence of revenues and mounting losses, any valuation premium appears unjustified, and the stock risks further de-rating if operational challenges persist.
Shareholding Pattern: Stable but Uninspiring Institutional Interest
The shareholding pattern reveals a promoter-dominated structure with zero institutional participation, a concerning signal for a publicly traded company. Promoters hold 63.65% of the equity, a stake that has remained unchanged over the past five quarters. The remaining 36.35% is held by non-institutional investors, with no presence from foreign institutional investors, mutual funds, insurance companies, or other domestic institutional investors.
| Quarter | Promoter % | FII % | MF % | Insurance % | Non-Institutional % |
|---|---|---|---|---|---|
| Sep'25 | 63.65% | 0.00% | 0.00% | 0.00% | 36.35% |
| Jun'25 | 63.65% | 0.00% | 0.00% | 0.00% | 36.35% |
| Mar'25 | 63.65% | 0.00% | 0.00% | 0.00% | 36.35% |
| Dec'24 | 63.65% | 0.00% | 0.00% | 0.00% | 36.35% |
| Sep'24 | 63.65% | 0.00% | 0.00% | 0.00% | 36.35% |
The complete absence of institutional investors reflects a lack of confidence in the company's business model and growth prospects. Professional fund managers typically avoid micro-cap stocks with erratic revenue patterns and limited operational track records. The stable promoter holding provides some governance continuity, and positively, there is no promoter pledging of shares. However, the lack of any institutional validation or participation remains a significant red flag for potential investors.
Stock Performance: Persistent Underperformance Across All Timeframes
Hemang Resources has delivered disappointing returns across virtually all meaningful timeframes, significantly underperforming both the Sensex benchmark and its sector peers. The stock has declined 21.82% over the past year, compared to the Sensex's gain of 9.36%, resulting in a negative alpha of 31.18 percentage points. The underperformance extends across shorter timeframes as well, with the stock down 4.44% over one month versus the Sensex's gain of 0.74%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.38% | +0.84% | -2.22% |
| 1 Month | -4.44% | +0.74% | -5.18% |
| 3 Months | -12.24% | +4.06% | -16.30% |
| 6 Months | -13.72% | +2.73% | -16.45% |
| YTD | -30.17% | +8.24% | -38.41% |
| 1 Year | -21.82% | +9.36% | -31.18% |
| 2 Years | -42.53% | +28.55% | -71.08% |
| 3 Years | -56.96% | +37.16% | -94.12% |
The technical picture reinforces the bearish fundamental narrative. The stock entered a bearish trend on November 14, 2025, at ₹21.45, and currently trades below all key moving averages—the 5-day (₹21.86), 20-day (₹22.05), 50-day (₹22.25), 100-day (₹22.95), and 200-day (₹23.93) moving averages. This alignment of moving averages in descending order is a classic technical signal of sustained downward momentum. The stock's beta of 1.50 indicates high volatility, with movements 50% more pronounced than the broader market, amplifying downside risk during market corrections.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
The investment case for Hemang Resources is severely compromised by fundamental operational challenges that overshadow any potential positives. The company's proprietary Mojo Score stands at just 12 out of 100, firmly in the "STRONG SELL" category. This low score reflects a confluence of negative factors: bearish technical trends, flat financial performance, below-average quality grade, and risky valuation.
The quality grade of "BELOW AVERAGE" reflects the company's inconsistent operational performance despite a reasonable five-year sales growth rate of 55.53%. However, this growth metric is misleading given the company's history of zero-revenue quarters and reliance on exceptional other income to generate profits. The average ROCE of -33.65% indicates the company has consistently destroyed value, while the latest ROCE of -0.52% shows no meaningful improvement.
Key Strengths & Risk Factors
Key Strengths ✅
Clean Balance Sheet: Minimal debt of ₹0.71 crores with debt-to-equity of just 0.02 provides financial flexibility.
No Promoter Pledging: Zero pledged shares indicate promoter confidence and reduced governance risk.
Positive Working Capital: Current assets of ₹48.68 crores exceed current liabilities of ₹20.90 crores.
Stable Promoter Holding: Consistent 63.65% promoter stake over five quarters provides governance continuity.
Low Valuation Risk: Trading near 52-week low of ₹20.00 limits immediate downside to book value.
Key Concerns ⚠️
Revenue Collapse: Zero sales in Q2 FY26 and erratic revenue pattern across quarters indicate severe operational instability.
Consistent Losses: Quarterly loss of ₹0.22 crores despite minimal operating expenses raises sustainability concerns.
Negative ROCE: Latest ROCE of -0.52% shows the company is destroying shareholder value.
Zero Institutional Interest: Complete absence of FII, mutual fund, and insurance holdings signals lack of professional investor confidence.
Extreme Illiquidity: Average daily volume of just 101 shares makes entry/exit extremely difficult.
Persistent Underperformance: Negative alpha of 31.18% over one year and 94.12% over three years versus Sensex.
High Volatility: Beta of 1.50 amplifies downside risk during market corrections.
Outlook: Critical Monitoring Points for Operational Revival
Positive Catalysts
Revenue Resumption: Any quarter with consistent sales above ₹2.00 crores would signal operational stabilisation.
Return to Profitability: Positive PAT for two consecutive quarters would indicate business model viability.
Institutional Entry: Any mutual fund or insurance company stake would validate investment thesis.
Liquidity Improvement: Average daily volumes exceeding 10,000 shares would enhance tradability.
Red Flags
Another Zero Revenue Quarter: Q3 FY26 with zero sales would confirm business model failure.
Continued Losses: Three consecutive quarters of losses would exhaust remaining investor patience.
Promoter Stake Reduction: Any decline in 63.65% promoter holding would signal loss of confidence.
Working Capital Deterioration: Decline in current ratio below 2.0x would raise liquidity concerns.
Break Below Book Value: Stock trading below ₹19.67 would eliminate valuation support.
"With zero revenues, mounting losses, and no institutional validation, Hemang Resources exemplifies a micro-cap value trap where apparent low valuation masks fundamental business model challenges."
The Verdict: Avoid This Operational Quagmire
Score: 12/100
For Fresh Investors: Avoid entirely. The complete absence of revenue generation in Q2 FY26, combined with a history of erratic quarterly performance, makes this an unacceptable risk even at current valuations near book value. The lack of any institutional participation and extreme illiquidity further compound the investment risks. There are far better opportunities in the micro-cap space with actual operating businesses.
For Existing Holders: Consider exiting on any bounce towards ₹23.00-24.00 levels to minimise losses. The bearish technical trend, deteriorating fundamentals, and absence of near-term catalysts suggest limited probability of meaningful recovery. If the company posts another zero-revenue quarter in Q3 FY26, immediate exit is recommended regardless of price. The stock's high beta of 1.50 means it will likely amplify any broader market weakness.
Fair Value Estimate: ₹16.00-18.00 (16.28% to 25.58% downside from current levels), reflecting persistent operational challenges and lack of earnings visibility.
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.
