The December 2025 quarter marked a continuation of the company's deteriorating financial trajectory, with revenue declining for the third consecutive quarter on a year-on-year basis. Net sales of ₹111.40 crores represented a 10.90% decline compared to ₹125.03 crores in Q3 FY25, whilst sequential growth of 8.96% from Q2 FY26's ₹102.24 crores provided limited comfort. More alarmingly, operating profit excluding other income plummeted to ₹13.72 crores, marking the lowest quarterly figure in recent periods and translating to an operating margin of just 12.32%—a stark deterioration from 19.38% in the year-ago quarter.
The profit decline was even more pronounced, with consolidated net profit of ₹9.26 crores representing a 45.75% year-on-year contraction and a 19.62% quarter-on-quarter fall. This marked the third consecutive quarter of year-on-year profit decline, raising serious questions about the sustainability of the company's business model in the current operating environment. The stock has responded accordingly, trading at ₹166.20 as of February 13, 2026, down 3.12% on the day and reflecting broader investor concerns about the company's trajectory.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Dec'25 | 111.40 | +8.96% | 9.26 | -19.62% | 12.32% |
| Sep'25 | 102.24 | -16.48% | 11.52 | -16.76% | 16.22% |
| Jun'25 | 122.41 | -9.66% | 13.84 | -21.32% | 15.64% |
| Mar'25 | 135.50 | +8.37% | 17.59 | +3.05% | 17.68% |
| Dec'24 | 125.03 | -6.18% | 17.07 | -1.78% | 19.38% |
| Sep'24 | 133.27 | +6.59% | 17.38 | +1.82% | 18.11% |
| Jun'24 | 125.03 | — | 17.07 | — | 19.38% |
Financial Performance: Deteriorating Margins Amplify Profit Pressure
The Q3 FY26 results revealed a company grappling with multiple operational challenges. Whilst revenue showed modest sequential improvement of 8.96% from Q2 FY26's ₹102.24 crores, the year-on-year comparison remained deeply troubling with a 10.90% decline. More concerning was the sharp margin compression across all profitability metrics. Operating profit excluding other income collapsed to ₹13.72 crores from ₹24.23 crores in Q3 FY25, resulting in an operating margin of just 12.32% compared to 19.38% a year earlier—a devastating 701 basis point contraction.
The margin erosion cascaded through the profit and loss statement. Gross profit margin declined to 12.80% from 20.03% year-on-year, whilst PAT margin compressed to 8.20% from 13.65%. This suggests significant cost pressures, potentially from rising input costs, competitive pricing pressures, or operational inefficiencies. Employee costs remained relatively stable at ₹6.02 crores in Q3 FY26 compared to ₹6.98 crores in Q3 FY25, indicating that the margin pressure stemmed primarily from other operational factors rather than personnel expenses.
The quality of earnings also deteriorated, with profit before tax declining to ₹12.36 crores from ₹23.04 crores year-on-year—a 46.35% collapse. Tax expenses of ₹3.23 crores represented an effective tax rate of 26.13%, consistent with historical norms but providing no relief to the bottom line. The company's earnings per share for Q3 FY26 stood at ₹2.35, marking the lowest quarterly EPS in recent periods and reflecting the severe profit compression.
Operational Challenges: Strong Balance Sheet Cannot Offset Performance Concerns
Despite the troubling quarterly performance, Likhitha Infrastructure maintains several structural strengths that distinguish it from peers. The company operates with zero long-term debt, positioning it as a net cash company with a debt-to-equity ratio of -0.18. This financial flexibility is evident in its robust balance sheet, with shareholder funds of ₹372.95 crores as of March 2025 and current assets of ₹397.73 crores significantly exceeding current liabilities of ₹50.42 crores. The company's return on equity, whilst declining, remains respectable at 20.75% on an average basis, demonstrating efficient capital utilisation despite recent operational headwinds.
However, this financial strength has not translated into operational momentum. The company's return on capital employed (ROCE) has deteriorated sharply, with the half-yearly figure for H1 FY26 marking the lowest at 20.63%—a significant decline from the historical average of 38.39%. This suggests that the company is generating diminishing returns on its deployed capital, a worrying trend for a capital-intensive construction business. The compression in operating profit to net sales ratio, which fell to 12.32% in Q3 FY26, further underscores the operational challenges facing the company.
Critical Warning Signals
Negative Financial Trend: The company's short-term financial trend turned negative in Q3 FY26, with eight key negative factors identified. These include quarterly PAT falling 38.3% versus the previous four-quarter average, quarterly net sales declining 8.2% versus the previous four-quarter average, and operating profit to net sales hitting a multi-quarter low at 12.32%. Cash and cash equivalents for H1 FY26 also marked a low at ₹73.87 crores, suggesting potential working capital pressures.
Sustained Profit Decline: The company has now reported three consecutive quarters of year-on-year profit decline, with Q3 FY26's 45.75% YoY drop representing the steepest contraction. This persistent deterioration raises questions about whether the company is facing temporary cyclical headwinds or more structural challenges in its core gas pipeline and irrigation infrastructure business.
Industry Context: Construction Sector Headwinds Amplify Company-Specific Challenges
The construction sector has delivered a robust 14.10% return over the past year, making Likhitha Infrastructure's 39.63% decline particularly stark. This 53.73 percentage point underperformance versus the sector benchmark suggests that the company's challenges extend beyond industry-wide factors. Whilst the broader construction sector has benefited from government infrastructure spending and urban development initiatives, Likhitha Infrastructure's specialisation in gas pipeline laying and irrigation canals appears to have faced project-specific headwinds.
The company's revenue volatility is evident in its quarterly performance, with sales swinging from ₹135.50 crores in Q4 FY25 to ₹102.24 crores in Q2 FY26 before recovering modestly to ₹111.40 crores in Q3 FY26. This lumpiness is characteristic of project-based businesses but raises concerns about revenue visibility and order book strength. The absence of disclosed order book data in the available information prevents a comprehensive assessment of future revenue potential, though the sustained revenue decline across three consecutive quarters on a year-on-year basis suggests limited near-term project pipeline.
Long-Term Growth Concerns
Whilst Likhitha Infrastructure has delivered a respectable 16.59% sales CAGR over the past five years, its EBIT growth has lagged significantly at just 3.87% annually. This divergence between revenue and operating profit growth indicates persistent margin compression over the medium term, not merely a recent phenomenon. The company's operating profit has grown at less than a quarter of its revenue growth rate, suggesting structural challenges in converting top-line expansion into bottom-line profitability.
Peer Comparison: Valuation Discount Reflects Operational Underperformance
Compared to its construction sector peers, Likhitha Infrastructure presents a mixed picture. The company's price-to-earnings ratio of 10.89x appears attractive relative to the sector average of approximately 19x, with peers like Om Infra trading at 32.10x and Vishnu Prakash R at 18.98x. However, this valuation discount reflects the market's concerns about the company's deteriorating operational performance rather than representing a genuine bargain opportunity.
| Company | P/E (TTM) | ROE (%) | P/BV | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Likhitha Infra | 10.89 | 20.75% | 1.65 | -0.18 | NA |
| SRM Contractors | 12.39 | 24.37% | 3.02 | -0.25 | NA |
| Vascon Engineers | 12.01 | 6.36% | 0.82 | 0.00 | NA |
| Om Infra | 32.10 | 3.71% | 1.21 | 0.05 | 0.43% |
| JP Associates | NA (Loss Making) | 0.0% | -0.16 | -3.21 | NA |
| Vishnu Prakash R | 18.98 | 10.04% | 0.74 | 0.85 | NA |
Likhitha Infrastructure's return on equity of 20.75% positions it favourably against most peers, with only SRM Contractors delivering superior ROE at 24.37%. The company's debt-free status also compares favourably, with a negative debt-to-equity ratio of -0.18 indicating net cash on the balance sheet. However, the price-to-book ratio of 1.65x sits in the middle of the peer range, suggesting the market is not according significant premium for the company's financial strength given its operational challenges.
Valuation Analysis: Attractive Multiples Mask Deteriorating Fundamentals
At the current market price of ₹166.20, Likhitha Infrastructure trades at a P/E ratio of 10.89x, significantly below the construction sector average of 38x. The company's price-to-book ratio of 1.65x appears reasonable given its book value per share of ₹94.54, whilst the EV/EBITDA multiple of 7.03x suggests modest valuation. These metrics have earned the stock a "Very Attractive" valuation grade, with the company's proprietary valuation assessment noting that the stock has attractive valuation parameters compared to its historical trading range.
However, investors must exercise caution in interpreting these seemingly attractive multiples. The P/E ratio of 10.89x is based on trailing twelve-month earnings that are rapidly deteriorating, with the most recent quarter showing a 45.75% year-on-year profit decline. If this trend continues, the forward P/E ratio could expand significantly, eroding the apparent valuation appeal. The company's market capitalisation of ₹659 crores places it firmly in micro-cap territory, with attendant liquidity risks and higher volatility.
The stock's dramatic decline from its 52-week high of ₹324.45 to the current ₹166.20—a 48.77% fall—reflects the market's reassessment of the company's earnings power. The stock now trades just 7.02% above its 52-week low of ₹155.30, suggesting limited downside cushion. The absence of dividend yield (the company last paid ₹1.50 per share in September 2023 with a payout ratio of just 9.05%) provides no income support for investors during this period of operational weakness.
Shareholding Pattern: Stable Promoter Holding Amidst Institutional Exodus
The shareholding pattern reveals a company with concentrated promoter ownership but minimal institutional interest. Promoter holding has remained stable at 70.25% over the past four quarters, with no pledging of shares—a positive signal of promoter confidence. The key promoter, Srinivasa Rao Gaddipati, holds 68.38% of the company, with family members holding the remaining promoter stake.
| Quarter | Promoter | QoQ Change | FII | QoQ Change | Non-Inst |
|---|---|---|---|---|---|
| Dec'25 | 70.25% | 0.00% | 0.22% | +0.08% | 29.54% |
| Sep'25 | 70.25% | 0.00% | 0.14% | 0.00% | 29.62% |
| Jun'25 | 70.25% | 0.00% | 0.14% | -0.77% | 29.61% |
| Mar'25 | 70.25% | +0.22% | 0.91% | -0.13% | 28.84% |
| Dec'24 | 70.03% | — | 1.04% | — | 28.93% |
More concerning is the institutional shareholding profile. Foreign institutional investor (FII) holding has declined from 1.04% in December 2024 to just 0.22% in December 2025, with a sharp 0.77% reduction in Q1 FY26 alone. The company has zero mutual fund, insurance company, and other domestic institutional investor (DII) holdings, indicating a complete absence of institutional participation. This lack of institutional support limits the stock's liquidity and suggests that sophisticated investors remain unconvinced about the company's prospects despite the ostensibly attractive valuation.
Stock Performance: Severe Underperformance Across All Timeframes
Likhitha Infrastructure's stock performance has been deeply disappointing across virtually all timeframes. Over the past year, the stock has declined 39.63% whilst the Sensex gained 8.52%, resulting in a negative alpha of 48.15 percentage points. The underperformance has been even more pronounced over longer periods, with the stock down 34.84% over two years versus the Sensex's 15.47% gain, and down 28.93% over three years against the Sensex's 36.73% advance.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -0.48% | -1.14% | +0.66% |
| 1 Month | -3.12% | -1.20% | -1.92% |
| 3 Months | -24.06% | -2.19% | -21.87% |
| 6 Months | -33.28% | +2.59% | -35.87% |
| YTD | -13.08% | -3.04% | -10.04% |
| 1 Year | -39.63% | +8.52% | -48.15% |
| 2 Years | -34.84% | +15.47% | -50.31% |
| 3 Years | -28.93% | +36.73% | -65.66% |
The technical picture is equally concerning. The stock entered a bearish trend on November 6, 2025, at ₹230 and has continued to deteriorate since then. All major technical indicators—MACD, RSI (on weekly timeframe), Bollinger Bands, moving averages, and KST—are flashing bearish signals. The stock trades below all key moving averages, including the 5-day (₹169.45), 20-day (₹165.70), 50-day (₹177.39), 100-day (₹200.41), and 200-day (₹236.82) moving averages, indicating sustained selling pressure.
The stock's beta of 1.50 indicates high volatility relative to the market, with a one-year volatility of 37.85% compared to the Sensex's 11.53%. This elevated volatility, combined with negative returns, results in a deeply negative risk-adjusted return of -1.05, placing the stock firmly in the "high risk, low return" category. The immediate support level sits at ₹155.30 (the 52-week low), whilst resistance emerges at ₹165.70 (20-day moving average), ₹200.41 (100-day moving average), and ₹236.82 (200-day moving average).
Investment Thesis: Deteriorating Fundamentals Override Balance Sheet Strength
The investment case for Likhitha Infrastructure presents a stark contrast between financial strength and operational weakness. The company's proprietary Mojo score of 29 out of 100 results in a "Strong Sell" rating, reflecting the confluence of negative factors. The four-dot Mojo analysis reveals the disconnect: whilst valuation appears "Very Attractive" and quality is rated "Average," both near-term drivers (financial trend and technicals) are decisively negative.
The company's average quality grade reflects its historical performance rather than current trajectory. Whilst the five-year sales CAGR of 16.59% and average ROCE of 38.39% demonstrate past success, the recent deterioration is severe. The current ROCE for H1 FY26 of 20.63% marks the lowest in recent periods, whilst the five-year EBIT growth of just 3.87% highlights the persistent margin compression that has accelerated in recent quarters.
Key Strengths & Risk Factors
✓ Key Strengths
- Debt-Free Balance Sheet: Zero long-term debt with net cash position (debt-to-equity of -0.18) provides financial flexibility and resilience
- Strong Historical ROCE: Average ROCE of 38.39% demonstrates efficient capital deployment capabilities when operations normalise
- Solid Equity Base: Shareholder funds of ₹372.95 crores with book value per share of ₹94.54 provide downside cushion
- Stable Promoter Holding: 70.25% promoter stake with zero pledging indicates aligned interests and confidence
- Attractive Valuation Multiples: P/E of 10.89x and EV/EBITDA of 7.03x appear compelling relative to sector averages
- Niche Specialisation: Focus on gas pipeline laying and irrigation infrastructure provides differentiated positioning
- Consistent Tax Efficiency: Effective tax rate of 26.13% remains stable and within normal parameters
⚠ Key Concerns
- Severe Profit Decline: Q3 FY26 net profit down 45.75% YoY, marking third consecutive quarter of YoY decline
- Margin Compression: Operating margin collapsed to 12.32% from 19.38% YoY—a devastating 701 bps deterioration
- Negative Financial Trend: Eight key negative factors identified in Q3 FY26, including lowest quarterly operating profit
- Weak Revenue Growth: Sales down 10.90% YoY in Q3 FY26, with sustained pressure across three quarters
- Deteriorating ROCE: H1 FY26 ROCE of 20.63% marks multi-period low, down from 38.39% average
- Zero Institutional Interest: No mutual fund, insurance, or meaningful FII holdings; FII stake declined from 1.04% to 0.22%
- Bearish Technical Setup: All indicators negative; stock below all moving averages with 39.63% one-year decline
- High Volatility: Beta of 1.50 and volatility of 37.85% create elevated risk profile
- Limited Liquidity: Micro-cap status (₹659 crore market cap) with low institutional holding restricts tradability
Outlook: What to Watch
Positive Catalysts
- Margin Recovery: Stabilisation of operating margins above 15% would signal operational improvement
- Order Book Visibility: Disclosure of robust order pipeline could restore revenue confidence
- Sequential Revenue Growth: Sustained QoQ revenue expansion for 2-3 quarters would indicate business momentum
- Institutional Interest: Entry of mutual funds or meaningful FII buying would validate investment case
- Project Diversification: Expansion into adjacent infrastructure segments could broaden revenue base
Red Flags
- Further Margin Erosion: Operating margin falling below 10% would indicate structural challenges
- Fourth Consecutive YoY Profit Decline: Q4 FY26 showing continued profit contraction would cement negative trend
- Working Capital Deterioration: Further decline in cash position or rise in receivables would strain liquidity
- Promoter Stake Reduction: Any decline in 70.25% promoter holding would signal confidence issues
- Technical Breakdown: Stock breaking below ₹155 (52-week low) would trigger additional selling pressure
The Verdict: Exit Recommended Despite Balance Sheet Strength
Score: 29/100
For Fresh Investors: Avoid initiating positions. Whilst valuation multiples appear attractive, the deteriorating operational performance, persistent margin compression, and negative financial trend create a classic value trap. The absence of institutional interest and bearish technical setup suggest further downside risk before any potential turnaround materialises.
For Existing Holders: Consider exiting positions on any technical bounce towards ₹175-180 levels. The three consecutive quarters of YoY profit decline, collapsing margins (12.32% vs 19.38% YoY), and negative financial trend indicate structural challenges that may require multiple quarters to resolve. The debt-free balance sheet provides some downside protection, but operational momentum must improve before re-evaluation.
Fair Value Estimate: ₹140-150 (16% downside risk from current levels) based on deteriorating earnings trajectory and sector de-rating. The stock must demonstrate margin stabilisation and revenue growth resumption before commanding premium valuations.
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. Past performance is not indicative of future results. The stock market involves risk, and investors may lose principal. The views expressed are based on data available as of February 14, 2026, and are subject to change.
