Kriti Nutrients Q2 FY26: Profit Tumbles 38% Despite Revenue Growth as Margins Compress

The stock, trading at ₹88.00 as of November 14, 2025, has been under significant pressure, declining 24.53% over the past year and underperforming its edible oil sector peers by 20.81 percentage points. With a market capitalisation of ₹436.00 crores, Kriti Nutrients finds itself in a challenging position as margin pressures mount despite volume-led revenue growth.

The company's Q2 FY26 performance reveals a troubling divergence between top-line expansion and bottom-line contraction. Whilst net sales grew 13.37% year-on-year to ₹212.93 crores, the consolidated net profit of ₹8.90 crores marked a sharp 37.63% decline from ₹14.27 crores in Q2 FY25. On a sequential basis, the picture remains subdued with a 6.22% quarter-on-quarter decline in net profit despite the company navigating through the festive season.

Financial Performance: Margin Compression Overshadows Revenue Growth

The most concerning aspect of Kriti Nutrients' Q2 FY26 results is the severe margin compression across all profitability metrics. The operating profit margin (excluding other income) contracted sharply to 5.28% from 9.90% in the year-ago quarter, representing a decline of 462 basis points. This deterioration suggests significant cost pressures, likely stemming from elevated raw material costs or intensifying competition in the edible oil segment that has prevented the company from passing on cost increases to consumers.

On a half-yearly basis (H1 FY26), the company reported net sales of ₹441.97 crores, representing growth of 22.30% compared to H1 FY25. However, the consolidated net profit for the same period stood at ₹18.44 crores, down 22.62% year-on-year. This stark divergence between revenue and profit growth underscores the structural challenges facing the business. The PAT margin for H1 FY26 compressed to 4.17% from 6.82% in the corresponding period last year, reflecting ongoing profitability pressures.

The operating profit (PBDIT excluding other income) for Q2 FY26 stood at ₹11.24 crores, down 39.56% from ₹18.59 crores in Q2 FY25. Whilst employee costs remained relatively stable at ₹3.95 crores, the sharp decline in absolute operating profit despite higher revenues indicates significant pressures on gross margins. Interest costs remained minimal at ₹0.12 crores, reflecting the company's zero-debt status, whilst depreciation stood at ₹1.43 crores.

Tax incidence for Q2 FY26 was 23.78%, marginally lower than the 24.01% in the year-ago quarter. The effective tax rate has remained broadly stable across recent quarters, ranging between 22% and 24%, suggesting no significant tax-related distortions in reported profitability.

Operational Challenges: Return Ratios Under Pressure

The company's return on equity (ROE) has declined to 15.09% from its five-year average of 16.93%, whilst return on capital employed (ROCE) stands at 22.84% compared to the five-year average of 23.61%. Whilst these metrics remain respectable in absolute terms, the downward trajectory is concerning and reflects the ongoing margin pressures. Higher ROE typically indicates better capital efficiency, and the declining trend suggests the company is generating lower returns on shareholder capital despite maintaining a debt-free balance sheet.

On a positive note, Kriti Nutrients maintains a pristine balance sheet with zero long-term debt as of March 2025. The company's net debt to equity ratio stands at -0.12, indicating it is a net cash company. Shareholder funds increased to ₹211.86 crores in FY25 from ₹176.49 crores in FY24, driven by retained earnings. The company's fixed assets stood at ₹57.59 crores, whilst investments surged to ₹32.56 crores from zero in the previous year, suggesting deployment of surplus cash.

Working capital management appears efficient with an inventory turnover ratio reaching its highest level of 20.91 times in H1 FY26. Cash and cash equivalents stood at a robust ₹52.13 crores in the half-year period, providing adequate liquidity cushion. However, the company's cash flow from operations declined to ₹31.00 crores in FY25 from ₹49.00 crores in FY24, reflecting the profit pressures.

Industry Context: Edible Oil Sector Headwinds

The edible oil industry in India has faced significant headwinds over the past year, with volatile commodity prices, intense competition, and changing consumer preferences impacting profitability across the sector. Kriti Nutrients' struggles mirror broader industry challenges, though the company's underperformance relative to peers suggests company-specific issues beyond sectoral trends.

The company's five-year sales growth of 7.10% and EBIT growth of 15.56% indicate moderate historical expansion, but recent quarterly trends suggest momentum has stalled. The flat financial trend designation for Q2 FY26 by analysts reflects the mixed signals emanating from the business, with revenue growth failing to translate into proportionate profit expansion.

Peer Comparison: Valuation Discount Reflects Concerns

When compared to its edible oil sector peers, Kriti Nutrients trades at a significant valuation discount, which appears justified given its deteriorating operational metrics. The company's price-to-earnings ratio of 13.79 times compares favourably to the peer group average of approximately 42 times, but this discount reflects market concerns about sustainability of earnings rather than representing an attractive entry opportunity.

Kriti Nutrients' ROE of 16.93% positions it in the middle of the peer group, outperforming companies like AWL Agri Business (8.39%) and CIAN Agro (2.64%) but trailing Shri Venkatesh (23.79%) and Gokul Agro (21.94%). The company's price-to-book ratio of 2.08 times is the lowest in the peer group, reflecting market scepticism about the sustainability of current book value given deteriorating return ratios.

Notably, Kriti Nutrients offers the highest dividend yield in its peer group at 3.75%, having recently declared a dividend of ₹3 per share with an ex-dividend date of November 13, 2025. However, the dividend payout ratio of just 3.32% suggests the company retains most earnings, and the high yield primarily reflects the depressed stock price rather than generous distributions.

Valuation Analysis: Attractive Multiples, But Are They Justified?

At the current market price of ₹88.00, Kriti Nutrients trades at a P/E ratio of 13.79 times trailing twelve-month earnings, representing a 40% discount to the edible oil industry average P/E of 23 times. The stock's price-to-book value of 2.08 times compares to a book value per share of ₹42.28, suggesting the market values the company at roughly twice its net asset value.

The enterprise value to EBITDA multiple of 10.45 times and EV to EBIT of 11.78 times appear reasonable on the surface, but these metrics must be viewed in the context of deteriorating margins and declining profitability. The EV to sales ratio of 0.51 times suggests the market values the entire business at approximately half of annual revenues, which could indicate either undervaluation or justified concerns about profit sustainability.

The valuation grade of "Attractive" assigned by analysts appears generous given the operational challenges. Whilst the stock has corrected 43.32% from its 52-week high of ₹155.25, this decline reflects genuine concerns about earnings trajectory rather than creating a compelling value opportunity. The stock trades just 4.76% above its 52-week low of ₹84.00, suggesting limited downside cushion.

Shareholding Pattern: Stable Promoter Base, Negligible Institutional Interest

Kriti Nutrients' shareholding pattern reveals a stable promoter holding of 66.68% that has remained unchanged over the past five quarters. The largest promoter entity, Sakam Trading Private Limited, holds 61.72% of the company, with individual promoters holding the balance. Importantly, there is zero promoter pledging, indicating confidence and financial stability at the promoter level.

The concerning aspect of the shareholding pattern is the complete absence of institutional investor interest. Foreign institutional investors (FIIs) have reduced their already minimal stake from 0.04% in December 2024 to zero in September 2025, whilst mutual funds, insurance companies, and other domestic institutional investors have maintained zero holdings throughout. This lack of institutional participation reflects the company's micro-cap status and limited liquidity, but also suggests professional investors see limited upside potential given current operational trends.

The non-institutional shareholding, comprising retail investors and non-institutional entities, has marginally increased from 33.27% to 33.31% over the past year, though this represents minimal change. The stable shareholding pattern suggests neither significant accumulation nor distribution by any investor category.

Stock Performance: Sustained Underperformance Across Timeframes

Kriti Nutrients' stock performance has been disappointing across most timeframes, with the shares declining 24.53% over the past year whilst the Sensex gained 9.00%, resulting in negative alpha of 33.53 percentage points. The underperformance has been particularly acute in recent months, with the stock falling 18.52% over six months and 12.31% over three months, both periods during which the benchmark index posted positive returns.

The stock's year-to-date decline of 30.43% is particularly concerning, underperforming the Sensex by 38.65 percentage points. This sustained underperformance has pushed the stock below all key moving averages, with the current price of ₹88.00 trading below the 5-day (₹89.13), 20-day (₹88.49), 50-day (₹92.30), 100-day (₹99.72), and 200-day (₹103.74) moving averages. This technical setup suggests strong bearish momentum with no immediate support levels visible.

On a longer-term view, the stock has delivered positive returns, gaining 61.47% over three years and 167.48% over five years, both outperforming the Sensex. However, this historical outperformance appears to be eroding rapidly given the recent operational challenges and margin pressures.

The stock also underperformed its edible oil sector peers by 20.81 percentage points over the past year, with the sector declining just 3.72% compared to Kriti Nutrients' 24.53% fall. This relative underperformance suggests company-specific issues beyond broader industry headwinds.

Technical Analysis: Bearish Trend with Limited Support

From a technical perspective, Kriti Nutrients remains firmly in a bearish trend that commenced on August 4, 2025, at ₹108.75. The stock has since declined 19.07% from that level, with multiple technical indicators flashing bearish signals. The weekly MACD remains bearish, whilst the Bollinger Bands indicator suggests continued downside pressure on both weekly and monthly timeframes.

The stock's beta of 1.50 indicates high volatility, with movements 50% more volatile than the broader market. This high beta, combined with negative returns, places the stock in the "high risk, low return" category. The risk-adjusted return of -0.44 over the past year compares unfavourably to the Sensex's risk-adjusted return of 0.73, suggesting investors have been poorly compensated for the elevated risk.

Immediate support lies at the 52-week low of ₹84.00, just 4.55% below current levels, providing limited downside cushion. Resistance levels are scattered at ₹88.49 (20-day moving average), ₹99.72 (100-day moving average), and ₹103.74 (200-day moving average), with the 52-week high of ₹155.25 representing a distant target requiring a 76.42% rally.

Investment Thesis: Quality Concerns Outweigh Valuation Appeal

Kriti Nutrients presents a complex investment case where attractive valuation multiples are offset by deteriorating operational metrics and sustained margin pressures. The company's proprietary Mojo score of 37 out of 100, resulting in a "SELL" rating, reflects this challenging fundamental backdrop despite the seemingly cheap valuation.

The investment thesis is undermined by several critical factors: sustained margin compression with operating margins declining from 9.90% to 5.28% year-on-year, flat financial performance despite revenue growth, poor long-term growth trajectory with sales growing at just 7.10% annually over five years, and consistent underperformance versus both the broader market and sector peers.

Key Strengths & Risk Factors

Outlook: What to Watch in Coming Quarters

The coming quarters will be critical for Kriti Nutrients to demonstrate whether the current margin pressures are temporary cyclical headwinds or indicative of more permanent structural challenges. Management's ability to restore operating margins towards historical 9-10% levels whilst maintaining revenue growth will determine whether the current valuation discount represents an opportunity or a justified reflection of diminished earnings power.