Sadbhav Engineering's Q1 FY25 financials show mixed results with declining profitability and improving inventory turnover

Sadbhav Engineering, a microcap company in the capital goods industry, recently announced its financial results for the quarter ending June 2024. The company’s stock has been given a ‘Strong Sell’ call by MarketsMOJO.

According to the financials, Sadbhav Engineering has seen a negative performance in the quarter, with a score of -13 compared to 3 in the previous quarter. However, there are some positive aspects to the company’s financials. The inventory turnover ratio for the half-yearly period is the highest it has been in the last five periods, at 307.67 times, and has grown consistently each half-year. This indicates that the company has been able to sell its inventory at a faster rate.

Another positive aspect is the debt-equity ratio for the half-yearly period, which is the lowest it has been in the last five periods at -29.76 times. This shows that the company has been reducing its borrowing in comparison to its equity capital.

On the other hand, there are some concerning factors in Sadbhav Engineering’s financials. The operating profit to interest ratio for the quarter is the lowest it has been in the last five quarters at -1.86 times, and has fallen consistently each quarter. This suggests that the company’s ability to manage interest payments is deteriorating.

The profit before tax less other income (PBT) for the quarter has also fallen significantly at -129.14% year on year, and the profit after tax (PAT) has fallen at -194.5% year on year. This indicates a negative trend in the company’s near-term profitability.

Furthermore, the interest cost for the nine-month period has increased by 29.71%, indicating a rise in borrowings. The operating profit and PBT for the quarter are also at their lowest in the last five quarters, showing a negative trend in the company’s near-term profitability. The earnings per share for the quarter are also at their lowest in the last five quarters, indicating a decline in profitability for shareholders.

In addition, the company’s cash and cash equivalents for the half-yearly period are at their lowest in the last six periods, indicating a deterioration in short-term liquidity.

Overall, Sadbhav Engineering’s financial performance for the quarter ending June 2024 has been negative, with some positive aspects in terms of inventory turnover and debt-equity ratio. However, there are concerning factors such as declining profitability and deteriorating liquidity. Investors should carefully consider these factors before making any investment decisions.