Radhika Jeweltech Q3 FY26: Record Profit Surge Masks Margin Concerns

The stock, trading at ₹73.16 as of February 12, 2026, has declined 0.91% in the latest session and remains 34.37% below its 52-week high of ₹111.48. Despite the strong quarterly results, technical indicators signal a mildly bearish trend, with the stock trading below all major moving averages. The company's overall Mojo score of 51/100 translates to a HOLD rating, reflecting mixed signals across valuation, quality, and momentum parameters.

The December 2025 quarter marked a significant inflection point for Radhika Jeweltech, with net sales reaching an all-time quarterly high of ₹213.59 crores, representing a 60.53% quarter-on-quarter jump from ₹133.05 crores in Q2 FY26. Year-on-year growth, however, was more modest at 3.65%, indicating that the company's performance in the corresponding quarter last year (December 2024) was already elevated. This sequential acceleration suggests strong festive and wedding season demand, a typical pattern in India's jewellery retail cycle.

Financial Performance: Revenue Surge Meets Margin Reality

Radhika Jeweltech's Q3 FY26 performance presents a nuanced picture. Operating profit (PBDIT excluding other income) surged to ₹41.78 crores from ₹25.71 crores in Q2 FY26, marking a 62.52% sequential increase. However, the operating margin expanded only modestly to 19.56% from 19.32% in the previous quarter—a mere 24 basis points improvement despite the substantial revenue jump. This suggests that the company achieved scale benefits but faced either pricing pressures or elevated input costs during the festive season.

The profit after tax (PAT) margin for Q3 FY26 stood at 14.35%, up from 13.84% in Q2 FY26 but significantly lower than the 18.37% achieved in Q1 FY26. This margin volatility over the past three quarters highlights the seasonal nature of the jewellery business and the impact of gold price fluctuations on profitability. Interest costs declined to ₹0.56 crores from ₹0.75 crores quarter-on-quarter, providing some relief, whilst depreciation remained stable at ₹0.50 crores.

The tax rate normalised to 25.25% in Q3 FY26 from 26.02% in the previous quarter, contributing positively to bottom-line growth. On a nine-month basis for FY26 (April-December 2025), the company has posted cumulative net sales of ₹445.79 crores and net profit of ₹67.26 crores, representing healthy momentum compared to the ₹431.28 crores revenue and ₹46.40 crores profit in the corresponding nine-month period of FY25.

Operational Excellence: Strong ROE Signals Capital Efficiency

Radhika Jeweltech's return on equity (ROE) stands at an impressive 21.84% for the latest period, significantly outperforming the average ROE of 16.15% and demonstrating superior capital efficiency. This high ROE indicates that the company is generating substantial returns on shareholders' funds, a critical metric for evaluating management's ability to deploy capital effectively. The return on capital employed (ROCE) of 24.25% further reinforces this narrative, suggesting that the business generates attractive returns on the total capital invested, including debt.

The company's balance sheet as of March 2025 reveals shareholder funds of ₹322.65 crores, up from ₹264.91 crores in the previous year, reflecting retained earnings accumulation. Long-term debt stood at ₹9.25 crores, marginally down from ₹10.12 crores, indicating disciplined leverage management. Current assets of ₹364.65 crores comfortably exceed current liabilities of ₹43.94 crores, providing a healthy liquidity cushion. The debt-to-EBITDA ratio of 1.74 times and net debt-to-equity of 0.12 suggest a conservative capital structure with minimal financial risk.

However, cash flow dynamics present a mixed picture. For FY25, the company reported operating cash flow of ₹16.00 crores, a significant improvement from negative ₹25.00 crores in FY24, though working capital absorption of ₹49.00 crores indicates that growth is consuming substantial capital. The closing cash position of ₹5.00 crores as of March 2025 was modest, up from ₹2.00 crores in the previous year. Investors should monitor whether the strong Q3 FY26 performance translates into positive operating cash generation for the full fiscal year.

Industry Context: Navigating a Competitive Landscape

India's gems and jewellery sector has witnessed robust growth driven by rising disposable incomes, increasing preference for branded jewellery, and strong wedding season demand. However, the industry faces challenges including volatile gold prices, intense competition from both organised and unorganised players, and evolving consumer preferences towards lightweight and contemporary designs. Radhika Jeweltech, with its focus on jewellery manufacturing and retail, operates in a fragmented market where scale and brand recognition are increasingly important differentiators.

The company's modest 3.65% year-on-year revenue growth in Q3 FY26 contrasts with the broader sector's performance. The Gems, Jewellery and Watches sector index delivered a 29.69% return over the past year, whilst Radhika Jeweltech's stock declined 25.84%, resulting in a significant underperformance of 55.53 percentage points. This divergence suggests that whilst the sector has been in favour, company-specific challenges or lack of investor awareness have weighed on the stock's performance.

Compared to peers, Radhika Jeweltech trades at a reasonable P/E multiple of 12.42x, significantly lower than the peer average of approximately 18x. The company's ROE of 16.15% surpasses most competitors except PNGS Gargi Fashion Jewellery (23.51%), positioning it favourably on profitability metrics. However, the price-to-book value of 2.71x is higher than most peers, suggesting that the market assigns a premium to the company's capital efficiency despite recent stock underperformance. The minimal debt-to-equity ratio of 0.12 provides a significant safety cushion compared to more leveraged peers like T B Z (1.05) and Manoj Vaibhav (0.51).

Valuation Analysis: Fair Value Despite Recent Weakness

At the current market price of ₹73.16, Radhika Jeweltech trades at a P/E ratio of 12.42x based on trailing twelve-month earnings, substantially below the industry P/E of 54x. This valuation discount appears attractive, particularly considering the company's superior ROE and strong recent quarterly performance. The price-to-book value of 2.71x, whilst higher than some peers, is justified by the company's capital efficiency and growth trajectory over the past five years, during which sales have grown at a compound annual rate of 31.21%.

The enterprise value-to-EBITDA multiple of 8.92x and EV-to-capital employed ratio of 2.53x suggest reasonable valuation relative to the company's operational efficiency. The PEG ratio of 0.32x (calculated using five-year EBIT growth of 38.09%) indicates that the stock may be undervalued relative to its growth prospects. The company's valuation grade has fluctuated between "Fair" and "Attractive" over recent months, currently standing at "Fair" as of August 2025, reflecting the market's reassessment following the stock's decline from its 52-week high.

The stock's 52-week range of ₹64.00 to ₹111.48 provides context for potential upside. Trading 14.31% above the 52-week low but 34.37% below the 52-week high, the current price appears to be in a consolidation zone. Based on the company's improving fundamentals and reasonable valuation multiples, a fair value estimate of ₹95-100 per share appears justified, implying potential upside of 30-37% from current levels. However, this upside is contingent on sustained margin improvement and continued market share gains in the competitive jewellery sector.

Shareholding: Promoter Stake Reduction Raises Questions

The shareholding pattern reveals a notable development: promoter holding declined to 57.68% in both December 2025 and September 2025, down from 63.73% in the preceding quarters. This 6.05 percentage point reduction in Q2 FY26 represents a significant stake sale by the promoter group, which warrants scrutiny. Whilst promoters may reduce stakes for various legitimate reasons including personal financial planning or business diversification, such moves can sometimes signal concerns about near-term prospects or valuation.

The mirror increase in non-institutional holdings to 42.32% from 36.27% suggests that retail investors absorbed the promoter stake sale. Notably, institutional participation remains minimal, with zero holdings from mutual funds, insurance companies, and negligible FII presence. This absence of institutional validation is concerning for a company demonstrating strong operational metrics. The lack of institutional interest may reflect the company's micro-cap status, limited liquidity, or insufficient investor outreach, all factors that could constrain valuation multiples despite improving fundamentals.

On a positive note, there is no promoter pledging, eliminating concerns about financial distress or forced selling. The promoter group, led by Ashokkumar Mathurdas Zinzuwadia (22.33%), Zinzuwadia Hareshbhai M (19.45%), and other family members, still retains majority control at 57.68%, ensuring continuity in strategic direction. However, the recent stake reduction and absence of institutional buying suggest that investors should monitor future shareholding patterns closely for signs of either renewed promoter confidence or further exits.

Stock Performance: Significant Underperformance Despite Strong Fundamentals

Radhika Jeweltech's stock performance presents a stark contrast between short-term weakness and long-term strength. Over the past year, the stock has declined 25.84%, significantly underperforming the Sensex's 10.21% gain and generating negative alpha of 36.05 percentage points. This underperformance accelerated over the past six months, with the stock falling 23.54% whilst the broader market gained 4.63%, resulting in a 28.17 percentage point underperformance. The three-month return of -14.01% versus Sensex's -0.62% further highlights the stock's recent struggles.

However, the longer-term picture is dramatically different. Over three years, the stock has delivered 75.02% returns versus Sensex's 38.34%, generating positive alpha of 36.68 percentage points. The five-year performance is exceptional, with a staggering 2172.05% return compared to Sensex's 62.86%, translating to alpha of 2109.19 percentage points. This remarkable long-term outperformance reflects the company's transformation from a small proprietorship to a listed entity with growing scale and profitability.

Technical indicators paint a cautious picture. The stock is classified as "Mildly Bearish" as of February 10, 2026, having transitioned from "Bearish" on the same date. The stock trades below all key moving averages—5-day (₹71.43), 20-day (₹70.15), 50-day (₹73.35), 100-day (₹79.97), and 200-day (₹85.66)—suggesting persistent selling pressure. The adjusted beta of 1.25 indicates higher volatility than the broader market, with the stock classified as "High Beta" and exhibiting "High Risk Low Return" characteristics over the past year with a risk-adjusted return of -0.62 and volatility of 42.00%.

Investment Thesis: Quality Business, Timing Uncertainty

Radhika Jeweltech's investment thesis rests on several compelling fundamentals. The company has demonstrated consistent long-term growth with sales CAGR of 31.21% and EBIT CAGR of 38.09% over five years. The strong ROE of 21.84% and ROCE of 24.25% indicate efficient capital allocation and superior profitability. The conservative balance sheet with minimal leverage (debt-to-equity of 0.12) and strong interest coverage (31.19x) provides financial stability and flexibility for future growth initiatives.

The company's valuation appears attractive at a P/E of 12.42x, significantly below the industry average of 54x, and a PEG ratio of 0.32x suggests the stock is undervalued relative to growth prospects. The recent Q3 FY26 results, with record quarterly revenue and profit, demonstrate operational momentum and the management's ability to capitalise on seasonal demand. The absence of promoter pledging and majority promoter holding of 57.68% ensures alignment of interests between management and minority shareholders.

However, several concerns temper enthusiasm. The stock's significant underperformance over the past year (-25.84%) and bearish technical setup suggest near-term headwinds. The recent promoter stake reduction of 6.05 percentage points raises questions about insider confidence, particularly given the timing coinciding with strong operational performance. The complete absence of institutional investors—zero mutual fund and negligible FII holdings—indicates limited validation from sophisticated investors and could constrain liquidity and valuation re-rating.

Margin volatility remains a concern, with PAT margins fluctuating between 7.11% and 18.37% over recent quarters, reflecting the impact of gold price movements and seasonal demand patterns. The modest year-on-year revenue growth of 3.65% in Q3 FY26, despite strong sequential growth, suggests that the company faces challenges in sustaining momentum beyond seasonal peaks. Working capital intensity, as evidenced by ₹49.00 crores absorption in FY25, indicates that growth requires substantial capital deployment, potentially limiting free cash flow generation.

Outlook: What to Watch in Coming Quarters

The outlook for Radhika Jeweltech hinges on several critical factors that investors should monitor closely over the coming quarters. On the positive side, the company's ability to sustain the strong Q3 FY26 momentum into Q4 FY26 and beyond will be crucial. Wedding season demand typically extends through the March quarter, and management's ability to convert this seasonal strength into consistent performance will determine whether the recent results represent a structural improvement or a cyclical peak.

Margin sustainability is another key watchpoint. The company needs to demonstrate that it can maintain PAT margins in the 14-15% range consistently, rather than experiencing the wide fluctuations seen over recent quarters. This will require effective management of gold price volatility, competitive pricing strategies, and operational efficiencies. Investors should also watch for signs of institutional investor interest—any meaningful buying by mutual funds or FIIs would validate the investment thesis and potentially trigger a valuation re-rating.

From a risk perspective, further promoter stake reductions would be a significant red flag, potentially indicating concerns about business prospects or valuation. Similarly, any deterioration in working capital management or negative operating cash flow for FY26 would raise questions about the sustainability of growth. A technical breakdown below the 52-week low of ₹64.00 would likely trigger further selling pressure and could push the stock into a deeper correction.

Radhika Jeweltech represents a quality micro-cap business trading at reasonable valuations, supported by strong recent operational performance and solid long-term fundamentals. However, the near-term technical weakness, promoter stake reduction, and lack of institutional participation counsel patience. The stock is best suited for investors with a medium to long-term horizon who can tolerate volatility and are willing to accumulate gradually on dips rather than chasing momentum. The company's ability to sustain Q3 FY26 momentum, stabilise margins, and attract institutional interest will determine whether the current fair valuation evolves into a compelling opportunity or remains a value trap.