The stock has reacted violently to the company's deteriorating fundamentals, trading at ₹200.65 as of January 29, 2026, down 54.29% over the past year and a staggering 62.71% over three years. The shares have plunged 58.01% from their 52-week high of ₹477.85, currently hovering just 11.23% above the 52-week low of ₹180.40. Technical indicators paint an unequivocally bearish picture, with the stock trading below all key moving averages and locked in a confirmed downtrend.
Financial Performance: Margin Implosion Destroys Value
The Q2 FY26 results reveal a company in serious operational distress. Whilst net sales grew a modest 5.16% year-on-year to ₹134.60 crores and surged 56.57% quarter-on-quarter from ₹85.97 crores in Q1 FY26, the revenue expansion failed to translate into bottom-line growth. Operating profit excluding other income collapsed to ₹8.96 crores, yielding an anaemic operating margin of just 6.66% compared to 17.45% in the year-ago quarter—a margin compression of 1,079 basis points.
The company's profit before tax turned negative at ₹-0.55 crores in Q2 FY26, a dramatic reversal from ₹16.28 crores in Q2 FY25. Only a tax credit of ₹0.88 crores prevented an outright loss, allowing the company to eke out a meagre ₹0.33 crores in net profit. The PAT margin deteriorated to a negligible 0.25% from 9.63% in the corresponding quarter last year, representing a 938 basis point contraction that signals fundamental business model challenges.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Net Sales | ₹134.60 Cr | ₹85.97 Cr | ₹128.00 Cr | +56.57% | +5.16% |
| Operating Profit | ₹8.96 Cr | ₹-2.95 Cr | ₹22.34 Cr | +403.73% | -59.90% |
| Operating Margin | 6.66% | -3.43% | 17.45% | +1,009 bps | -1,079 bps |
| Net Profit | ₹0.33 Cr | ₹-7.61 Cr | ₹12.33 Cr | +104.34% | -97.32% |
| PAT Margin | 0.25% | -8.85% | 9.63% | +910 bps | -938 bps |
The half-yearly performance for H1 FY26 (April-September 2025) presents an equally grim picture. The company reported consolidated net profit of ₹-7.28 crores for the first half, compared to ₹14.34 crores in H1 FY25, representing a complete erosion of profitability. Revenue for the half-year stood at ₹220.57 crores, down from ₹216.20 crores, indicating that even top-line momentum has stalled.
Critical Red Flags
Margin Collapse: Operating margins have plummeted from 17.45% in Q2 FY25 to just 6.66% in Q2 FY26, whilst PAT margins have evaporated from 9.63% to a mere 0.25%. This 1,079 basis point operating margin compression in a single year signals severe cost structure problems or intense pricing pressure.
Negative Profitability Trend: The company's financial trend has turned "Negative" as of Q2 FY26, with profit before tax excluding other income falling 111.91% and PAT declining 97.30% year-on-year. This marks a significant deterioration from the "Flat" trend observed in previous quarters.
Operational Challenges: Cost Pressures and Deteriorating Returns
The company's operational metrics reveal deep-seated structural issues. Employee costs rose to ₹14.84 crores in Q2 FY26 from ₹10.61 crores in Q2 FY25, representing a 39.87% year-on-year increase that far outpaced revenue growth. Depreciation charges surged to ₹7.99 crores from ₹5.31 crores, a 50.47% jump that reflects recent capital investments yet to generate commensurate returns.
Return on equity has collapsed to a dismal 0.62% on a trailing twelve-month basis, down from an already weak average of 7.38% over recent years. Return on capital employed has turned negative at -0.02%, compared to an average of 10.32%, indicating that the company is destroying shareholder value with its current operations. These profitability metrics rank amongst the weakest in the industrial manufacturing sector and underscore fundamental business model challenges.
Balance Sheet Concerns Mounting
The debt-to-equity ratio for H1 FY26 has spiked to an alarming 3.16 times, the highest level in recent company history. Whilst long-term debt remains modest at ₹0.17 crores as of March 2025, the dramatic increase in this leverage metric suggests either a significant drawdown on working capital facilities or deterioration in equity base due to losses. Current liabilities have ballooned to ₹300.15 crores, up from ₹239.21 crores in the previous year, straining liquidity.
The company's five-year EBIT growth rate stands at a shocking -136.62%, indicating that operating profitability has contracted at a compound annual rate rather than expanding. This contrasts starkly with the 16.14% five-year sales CAGR, revealing a fundamental disconnect between revenue generation and profit conversion. The average EBIT-to-interest coverage ratio of 7.21 times, whilst adequate, has been deteriorating as interest costs rise and operating profits shrink.
Quarterly Trend: Persistent Volatility and Declining Trajectory
| Quarter | Revenue | Revenue Growth | Net Profit | Profit Growth | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | ₹134.60 Cr | +5.16% YoY | ₹0.33 Cr | -97.32% YoY | 0.25% |
| Jun'25 | ₹85.97 Cr | -2.53% YoY | ₹-7.61 Cr | -478.61% YoY | -8.85% |
| Mar'25 | ₹139.54 Cr | -16.93% YoY | ₹10.83 Cr | -42.91% YoY | 7.76% |
| Dec'24 | ₹121.17 Cr | N/A | ₹7.04 Cr | N/A | 5.81% |
| Sep'24 | ₹128.00 Cr | N/A | ₹12.33 Cr | N/A | 9.63% |
| Jun'24 | ₹88.20 Cr | N/A | ₹2.01 Cr | N/A | 2.28% |
| Mar'24 | ₹167.98 Cr | N/A | ₹18.97 Cr | N/A | 11.29% |
The quarterly trend analysis reveals extreme volatility in both revenue and profitability. The company has experienced wild swings in quarterly sales, ranging from ₹85.97 crores in Q1 FY26 to ₹167.98 crores in Q4 FY24, suggesting lumpy order flows typical of capital equipment manufacturers. However, the inability to maintain consistent margins across these revenue cycles points to poor operational execution and cost management.
Peer Comparison: Significant Underperformance Across Metrics
| Company | P/E (TTM) | P/BV | ROE | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Kabra Extrusion | 252.55x | 1.57x | 7.38% | 0.22 | 1.25% |
| Axtel Industries | 34.55x | 5.55x | 19.61% | -0.80 | 2.57% |
| Fabtech Tech. | 21.98x | 3.69x | 0.00% | 0.00 | NA |
| Forbes Precision | 25.76x | 4.53x | 18.80% | -0.08 | 3.73% |
| Airfloa Rail | 27.99x | 3.41x | 11.56% | 0.00 | NA |
Kabra Extrusion's peer comparison reveals a company trading at an inexplicably elevated P/E multiple of 252.55 times trailing earnings, nearly ten times the peer average of approximately 28 times. This valuation premium exists despite the company posting the weakest return on equity amongst comparable firms at just 7.38%, versus peer averages exceeding 12%. The price-to-book ratio of 1.57 times appears modest relative to peers averaging 4.3 times, but this reflects market recognition of the company's inferior capital efficiency rather than a valuation opportunity.
The dividend yield of 1.25% lags behind better-capitalised peers such as Forbes Precision (3.73%) and Axtel Industries (2.57%), limiting the stock's appeal to income-oriented investors. With a market capitalisation of ₹700.00 crores, Kabra Extrusion ranks fourth amongst its peer group, occupying a mid-tier position in the industrial manufacturing space.
Valuation Analysis: Expensive Multiple for Deteriorating Business
The company's valuation metrics present a troubling paradox: elevated multiples applied to a fundamentally deteriorating business. The P/E ratio of 252.55 times reflects near-zero earnings power, with the company barely profitable on a trailing twelve-month basis. The EV/EBITDA multiple of 32.70 times appears expensive relative to the industrial manufacturing sector average, particularly given the company's negative financial trend and collapsing margins.
The enterprise value to sales ratio of 1.66 times and EV to capital employed of 1.47 times suggest the market still prices in some expectation of recovery or turnaround. However, with return on capital employed turning negative and five-year EBIT growth at -136.62%, these multiples appear unjustified. The valuation grade has oscillated between "Fair" and "Very Attractive" in recent months, currently settling at "Fair," though this assessment appears generous given the fundamental deterioration.
Valuation Dashboard
P/E Ratio (TTM): 252.55x (Sector: 30x)
Price to Book: 1.57x
EV/EBITDA: 32.70x
Dividend Yield: 1.25%
Mojo Score: 17/100 (STRONG SELL)
The stock trades 58.01% below its 52-week high of ₹477.85, having collapsed from elevated levels as the market repriced the company's deteriorating fundamentals. At ₹200.65, the shares hover just 11.23% above the 52-week low of ₹180.40, suggesting limited downside cushion. The dramatic valuation compression reflects growing investor recognition that the company faces structural rather than cyclical challenges.
Shareholding Pattern: Institutional Exodus Continues
| Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 60.50% | 60.50% | 60.21% | 0.00% |
| FII | 0.39% | 0.37% | 0.81% | +0.02% |
| Mutual Funds | 0.01% | 0.01% | 0.01% | 0.00% |
| Other DII | 0.05% | 0.64% | 0.69% | -0.59% |
| Non-Institutional | 39.06% | 38.48% | 38.28% | +0.58% |
The shareholding pattern reveals a concerning institutional exodus. Foreign institutional investors have slashed their holdings from 2.96% in December 2024 to just 0.39% in December 2025, representing an 86.82% reduction in FII ownership over the past year. Other domestic institutional investors have similarly retreated, cutting their stake from 0.64% to 0.05% in the most recent quarter alone.
Mutual fund participation remains negligible at 0.01%, whilst insurance companies maintain zero exposure to the stock. Total institutional holdings stand at a meagre 0.45%, reflecting institutional investors' complete lack of confidence in the company's prospects. The promoter holding remains stable at 60.50% with zero pledging, which provides some comfort, though it also means promoters are not adding to their stake despite the sharp price decline.
Stock Performance: Severe Underperformance Across All Timeframes
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -10.64% | +0.31% | -10.95% |
| 1 Month | -11.84% | -2.51% | -9.33% |
| 3 Months | -18.35% | -2.86% | -15.49% |
| 6 Months | -28.13% | +1.51% | -29.64% |
| 1 Year | -54.29% | +7.88% | -62.17% |
| 2 Years | -52.29% | +14.77% | -67.06% |
| 3 Years | -62.71% | +39.16% | -101.87% |
The stock's performance has been catastrophic across all meaningful timeframes. Over the past year, Kabra Extrusion has delivered a return of -54.29% whilst the Sensex gained 7.88%, resulting in negative alpha of 62.17 percentage points. The three-year performance is even worse, with the stock down 62.71% against a Sensex gain of 39.16%, producing alpha of -101.87 percentage points.
The company has also dramatically underperformed its industrial manufacturing sector, which declined 21.91% over the past year. Kabra Extrusion's 54.29% decline represents underperformance of 32.38 percentage points versus sector peers, indicating company-specific rather than sector-wide challenges. The stock's beta of 1.16 suggests it amplifies market movements, currently working to investors' severe detriment in the prevailing bearish trend.
Technical indicators uniformly signal bearish momentum. The stock trades below all key moving averages—5-day (₹208.20), 20-day (₹210.24), 50-day (₹220.82), 100-day (₹238.50), and 200-day (₹258.02). MACD, Bollinger Bands, and KST indicators all flash bearish signals on both weekly and monthly timeframes. The stock transitioned to a "Bearish" trend from "Mildly Bearish" on January 23, 2026, confirming the downward momentum.
Investment Thesis: Weak Fundamentals Meet Expensive Valuation
Valuation: RISKY – The P/E multiple of 252.55 times appears unjustifiably elevated for a company with collapsing profitability, negative ROCE, and deteriorating margins. The valuation offers no margin of safety.
Quality Grade: AVERAGE – The company maintains an "Average" quality rating, though this assessment appears generous given the negative financial trend, weak ROE of 7.38%, and five-year EBIT contraction of 136.62%.
Financial Trend: NEGATIVE – The short-term financial trend turned "Negative" in Q2 FY26, with profit before tax excluding other income down 111.91% and PAT collapsing 97.30% year-on-year.
Technical Trend: BEARISH – All technical indicators point to continued downside, with the stock in a confirmed bearish trend and trading below all moving averages.
"With margins collapsing, returns turning negative, and institutional investors fleeing, Kabra Extrusion faces a crisis of confidence that transcends normal cyclical weakness."
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Promoter Commitment: Stable 60.50% promoter holding with zero pledging demonstrates promoter confidence and alignment
- Low Debt: Long-term debt of just ₹0.17 crores and average debt-to-EBITDA of 1.81 times provides financial flexibility
- Market Position: Established player in plastic extrusion machinery with recognised Kolsite Group brand heritage
- Dividend Track Record: Maintains dividend payments with 36.20% payout ratio despite earnings pressure
- Long-term Sales Growth: Five-year revenue CAGR of 16.14% demonstrates market demand for products
KEY CONCERNS ⚠
- Profit Collapse: Net profit down 97.32% YoY to ₹0.33 crores in Q2 FY26, representing near-total earnings erosion
- Margin Implosion: Operating margins compressed 1,079 bps to 6.66% and PAT margins to 0.25%, indicating severe cost pressures
- Negative Returns: ROCE turned negative at -0.02% whilst ROE languishes at 0.62%, destroying shareholder value
- Institutional Exodus: FII holdings collapsed from 2.96% to 0.39% over past year, total institutional ownership at 0.45%
- Elevated Leverage: Debt-to-equity ratio spiked to 3.16 times in H1 FY26, the highest in company history
- Stock Performance: Down 54.29% over one year and 62.71% over three years with consistent underperformance
- Valuation Disconnect: Trading at 252.55x P/E despite deteriorating fundamentals and negative trend
Outlook: What to Watch
POSITIVE CATALYSTS
- Margin recovery to double-digit operating margins in coming quarters
- Stabilisation of employee costs and operating expenses as percentage of revenue
- Return of quarterly profitability to ₹10+ crores levels seen historically
- Improvement in order book visibility and revenue predictability
- Institutional investor return or promoter open market purchases
RED FLAGS
- Further margin compression below 5% operating margin levels
- Quarterly losses in upcoming Q3 or Q4 FY26 results
- Continued institutional selling or promoter stake reduction
- Working capital deterioration or liquidity stress
- Stock breaking below ₹180 (52-week low) support level
The path forward for Kabra Extrusion requires urgent management action to arrest margin deterioration and restore profitability. Investors should monitor Q3 FY26 results closely for signs of stabilisation or further deterioration. The company needs to demonstrate that the current crisis represents a temporary cyclical trough rather than a permanent structural decline in business economics.
The Verdict: Avoid Until Fundamental Turnaround Evident
Score: 17/100
For Fresh Investors: Avoid initiating positions. The combination of collapsing profitability, negative returns on capital, institutional exodus, and bearish technical setup creates an unfavourable risk-reward profile. Wait for concrete evidence of margin recovery and earnings stabilisation before considering entry.
For Existing Holders: Consider exiting positions or significantly reducing exposure. The fundamental deterioration—97% profit decline, negative ROCE, margin compression of 1,079 bps—signals structural rather than cyclical challenges. The stock has broken below all key moving averages with no technical support until ₹180. Holding through this downturn carries significant risk of further capital erosion.
Fair Value Estimate: ₹150-170 (25-32% downside from current levels), based on normalised earnings of ₹0.60-0.70 per share and a sector-appropriate P/E multiple of 15-18x, reflecting the company's below-average quality and negative growth trajectory.
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.
