The stock, currently trading at ₹413.85, has experienced significant volatility, dropping 27.01% from its 52-week high of ₹567.00. Following the quarterly results, investor sentiment remains cautious, with the company's proprietary advisory score standing at a concerning 29 out of 100, firmly in "STRONG SELL" territory.
The company's recent transition from a loss-making entity in FY24 (net loss of ₹31.00 crores) to marginal profitability in FY25 (net loss of ₹5.00 crores) appeared promising. However, the inconsistent quarterly performance in the current fiscal year suggests that the turnaround remains fragile and far from complete. The H1 FY26 consolidated net profit of ₹1.04 crores, whilst positive, masks significant quarter-to-quarter volatility that undermines investor confidence.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Cons. Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|
| Sep'25 | 57.30 | +11.09% | -0.01 | -0.02% |
| Jun'25 | 51.58 | -29.63% | 1.05 | 2.04% |
| Mar'25 | 73.30 | +59.17% | 0.96 | 1.31% |
| Dec'24 | 46.05 | +41.61% | -1.34 | -2.91% |
| Sep'24 | 32.52 | +55.00% | -3.07 | -9.44% |
| Jun'24 | 20.98 | -16.05% | -2.48 | -11.82% |
| Mar'24 | 24.99 | — | -16.02 | -64.11% |
Financial Performance: Revenue Growth Fails to Translate into Profitability
In Q2 FY26, Semac Construction reported net sales of ₹57.30 crores, marking an 11.09% sequential increase from Q1 FY26's ₹51.58 crores and a robust 76.20% year-on-year surge from ₹32.52 crores in Q2 FY25. This top-line momentum demonstrates the company's ability to secure construction contracts and execute projects. For H1 FY26, net sales reached ₹108.88 crores, representing a remarkable 103.51% growth compared to the corresponding period last year.
However, the critical concern lies in the company's inability to convert this revenue growth into sustainable profits. The consolidated net profit for Q2 FY26 turned negative at ₹0.01 crores, a dramatic reversal from the ₹1.05 crores profit in Q1 FY26. On a standalone basis, the company posted a meagre net profit of ₹0.09 crores in Q2 FY26, down from ₹1.08 crores in the previous quarter. This represents a concerning 91.67% quarter-on-quarter decline in standalone profitability.
The operating profit margin (excluding other income) stood at a meagre 2.01% in Q2 FY26, marginally lower than Q1 FY26's 2.37%. Whilst this represents a significant improvement from the deeply negative margins of previous quarters, it remains insufficient to generate meaningful profitability after accounting for interest and depreciation costs. The company's PAT margin of 0.16% in Q2 FY26 underscores the razor-thin profitability profile.
A particularly troubling aspect is the company's heavy reliance on other income to support profitability. In Q2 FY26, other income of ₹1.01 crores represented a substantial 348.28% of profit before tax, indicating that operational earnings alone are insufficient to sustain the business. This dependency on non-operating income raises questions about the quality and sustainability of earnings.
Critical Profitability Warning
Operating Weakness: The company's operating profit (PBDIT excluding other income) of ₹1.15 crores in Q2 FY26 translates to a margin of just 2.01%. After deducting interest costs of ₹1.48 crores and depreciation of ₹0.38 crores, the company would have posted a loss without the support of ₹1.01 crores in other income. This structural weakness in core operations remains a fundamental concern.
Tax Anomaly: The tax rate of 68.97% in Q2 FY26 appears abnormally high, suggesting potential deferred tax adjustments or non-deductible expenses that further erode profitability.
Operational Challenges: Margin Pressures and Cost Structure Concerns
The company's operational metrics reveal significant challenges in managing costs and achieving economies of scale. Employee costs in Q2 FY26 stood at ₹6.02 crores, representing 10.51% of net sales. Whilst this ratio has improved from the 26.98% recorded in Q2 FY25, it remains elevated for a construction company operating at current revenue levels.
Interest costs have emerged as a major drag on profitability. In Q2 FY26, interest expenses surged to ₹1.48 crores, representing a 26.50% increase from Q1 FY26's ₹1.17 crores and an 11.28% rise year-on-year. This escalating interest burden reflects increased working capital requirements and potentially higher borrowing costs. The company's debt-to-equity ratio spiked to a concerning 6.33 times in H1 FY26, the highest level recorded, signalling aggressive leverage that amplifies financial risk.
The balance sheet reveals a capital-constrained business model. Shareholder funds declined to ₹73.87 crores as of March 2025 from ₹79.37 crores in the previous year, reflecting accumulated losses. Current liabilities surged to ₹137.72 crores, driven by trade payables of ₹38.56 crores and other current liabilities of ₹60.00 crores. This aggressive use of supplier credit and short-term financing underscores liquidity pressures.
Return on Equity: Weak Capital Efficiency
The company's average return on equity (ROE) over the past five years stands at just 7.35%, significantly below the threshold for quality businesses. Higher ROE indicates better capital efficiency and profitability, and Semac Construction's weak ROE reflects its struggles to generate adequate returns on shareholder capital. The latest ROE of -8.03% for FY25 highlights the deterioration in capital efficiency, with the company destroying rather than creating shareholder value.
The average return on capital employed (ROCE) of 0.83% over five years is equally concerning, indicating that the company barely generates returns above the cost of capital. The latest ROCE of -10.55% confirms that operational assets are currently unprofitable.
Cash Flow Analysis: Operational Strain and Financing Dependence
The company's cash flow statement reveals a business struggling to generate positive operating cash flows. In FY25, cash flow from operations was negative at ₹2.00 crores, deteriorating from negative ₹18.00 crores in FY24. The negative operating cash flow despite improved profitability suggests aggressive working capital deployment and potential collection challenges.
Changes in working capital consumed ₹8.00 crores in FY25, reflecting inventory build-up or extended receivables. The company has increasingly relied on financing activities to support operations, with cash flow from financing activities contributing ₹16.00 crores in FY25. This financing-dependent model raises sustainability concerns, particularly given the rising interest burden.
On a positive note, the company maintains a net cash position with negligible long-term debt. The average net debt to equity ratio of -0.23 indicates that cash and investments exceed borrowings. However, the spike in short-term liabilities and working capital debt suggests that this net cash position may not reflect the true liquidity position when considering operational commitments.
Industry Context: Construction Sector Headwinds
The broader construction sector has faced significant headwinds, with the industry delivering a negative 25.61% return over the past year. Semac Construction's 3.67% one-year return represents a remarkable 29.28% outperformance versus the sector, suggesting relative resilience despite absolute challenges. However, this outperformance must be viewed in context—the stock has declined 79.39% over two years and 53.24% over three years, indicating sustained value destruction.
The construction industry continues to grapple with raw material cost volatility, labour shortages, and intense competition for project awards. Margin pressures remain acute across the sector, with smaller players like Semac Construction particularly vulnerable to pricing pressures and working capital constraints. The company's micro-cap status (₹119.00 crores market capitalisation) limits its ability to compete for large-value contracts and negotiate favourable payment terms with clients.
| Company | Market Cap (₹ Cr) | P/E Ratio (TTM) | P/BV Ratio | ROE (%) | Debt to Equity |
|---|---|---|---|---|---|
| Semac Construction | 119.00 | NA (Loss Making) | 1.66 | 7.35 | -0.23 |
| Oval Projects | — | 14.23 | 1.28 | 0.00 | 1.18 |
| Sadbhav Infrastructure | — | 19.31 | -0.24 | 0.00 | -5.79 |
| Tarmat | — | 65.28 | 0.83 | 3.89 | 0.00 |
| BCPL Railway | — | 21.99 | 1.40 | 7.60 | 0.60 |
| Maruti Infrastructure | — | NA (Loss Making) | 4.66 | 4.76 | 1.62 |
Compared to peers, Semac Construction's ROE of 7.35% positions it favourably against several competitors posting zero or negative returns. However, the company's inability to generate consistent profits prevents meaningful P/E ratio comparisons. The price-to-book ratio of 1.66x appears reasonable but reflects market scepticism about the company's ability to generate sustainable returns on book value.
Valuation Analysis: Risky Proposition at Current Levels
Semac Construction's valuation metrics paint a concerning picture. The company is currently loss-making on a trailing twelve-month basis, rendering traditional P/E ratio analysis meaningless. The proprietary valuation assessment categorises the stock as "RISKY," reflecting fundamental concerns about earnings sustainability and capital efficiency.
The price-to-book ratio of 1.66x implies the market is willing to pay a 66% premium to book value despite the company's weak profitability track record. This valuation appears unjustified given the ROE of just 7.35% and the latest negative ROE of -8.03%. For context, quality businesses typically command P/BV premiums only when ROE significantly exceeds the cost of equity capital—a condition Semac Construction fails to meet.
The negative EV/EBITDA multiple of -68.44x and EV/EBIT of -33.25x reflect the company's operational losses and market concerns about value creation. The EV/Sales ratio of 0.52x suggests the market values the entire business at roughly half of annual revenues, indicating deep scepticism about profitability potential.
The stock currently trades at ₹413.85, down 27.01% from its 52-week high of ₹567.00 but still 56.76% above its 52-week low of ₹264.00. This positioning suggests the market remains uncertain about the company's trajectory, with the stock caught between optimism about revenue growth and pessimism about profitability sustainability.
Shareholding Pattern: Stable Promoter Base Provides Limited Comfort
The shareholding pattern reveals a stable promoter base holding 62.85% as of September 2025, unchanged over the past five quarters. This consistent promoter holding provides some comfort regarding management commitment, though it also reflects limited institutional interest in the stock. Foreign institutional investors (FIIs) hold a negligible 0.04%, whilst mutual funds and insurance companies have zero holdings, signalling a complete absence of institutional confidence.
| Quarter | Promoter % | FII % | Mutual Fund % | Insurance % | Non-Institutional % |
|---|---|---|---|---|---|
| Sep'25 | 62.85 | 0.04 | 0.00 | 0.00 | 37.10 |
| Jun'25 | 62.85 | 0.04 | 0.00 | 0.00 | 37.10 |
| Mar'25 | 62.85 | 0.04 | 0.00 | 0.00 | 37.10 |
| Dec'24 | 62.83 | 0.04 | 0.00 | 0.00 | 37.12 |
| Sep'24 | 62.83 | 0.04 | 0.00 | 0.00 | 37.12 |
The promoter group comprises Ajai Hari Dalmia Trust (45.68%), Radha Madhav Trust (13.47%), Hilltop Metals Ltd. (3.66%), and Mr. Harivansh Dalmia (0.04%). Positively, there is no promoter pledging, eliminating concerns about forced selling or financial distress at the promoter level. However, the complete absence of institutional investors—with total institutional holding at just 0.04%—reflects professional investors' lack of conviction in the company's business model and financial prospects.
Non-institutional shareholders constitute 37.10% of the shareholder base, representing primarily retail investors. The static nature of shareholding across quarters suggests limited trading activity and poor liquidity, which can exacerbate price volatility and make it difficult for investors to exit positions.
Stock Performance: Severe Long-Term Value Destruction
Semac Construction's stock performance reveals a pattern of severe long-term value destruction despite recent short-term resilience. The stock has delivered a modest 3.67% return over the past year, marginally underperforming the Sensex's 4.10% gain by 0.43%. However, this recent stabilisation masks catastrophic longer-term losses.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | +4.90% | +0.26% | +4.64% |
| 1 Week | +0.36% | -0.86% | +1.22% |
| 1 Month | -18.67% | +2.31% | -20.98% |
| 3 Months | -20.72% | +3.89% | -24.61% |
| 6 Months | +18.92% | +3.76% | +15.16% |
| 1 Year | +3.67% | +4.10% | -0.43% |
| 2 Years | -79.39% | +28.81% | -108.20% |
| 3 Years | -53.24% | +37.29% | -90.53% |
| 5 Years | -5.48% | +99.74% | -105.22% |
| 10 Years | -44.58% | +218.58% | -263.16% |
Over two years, the stock has plummeted 79.39%, massively underperforming the Sensex's 28.81% gain by 108.20 percentage points. The three-year performance shows a 53.24% decline versus the Sensex's 37.29% gain, representing 90.53 percentage points of underperformance. Over five years, whilst the stock has declined just 5.48%, the Sensex has surged 99.74%, resulting in 105.22 percentage points of underperformance.
The most alarming statistic is the ten-year performance: the stock has lost 44.58% of its value whilst the Sensex has more than tripled with a 218.58% gain. This represents a staggering 263.16 percentage points of underperformance, indicating systematic value destruction over the long term.
The stock's beta of 1.50 indicates high volatility, with movements 50% more pronounced than the broader market. Combined with a volatility of 48.21% over the past year, this classifies Semac Construction as a "HIGH RISK MEDIUM RETURN" investment. The Sharpe ratio, whilst positive, remains weak given the elevated risk profile.
"A decade of underperformance, losing 263 percentage points versus the Sensex, tells the story of a business that has consistently failed to create shareholder value despite periodic revenue growth spurts."
Technical Analysis: Sideways Trend with Bearish Undertones
From a technical perspective, Semac Construction's stock is currently in a "SIDEWAYS" trend, having shifted from "Mildly Bullish" on November 3, 2025, at ₹392.20. The stock trades below all key moving averages—5-day (₹402.42), 20-day (₹450.10), 50-day (₹493.11), 100-day (₹485.29), and 200-day (₹414.82)—indicating sustained selling pressure and lack of momentum.
Technical indicators present a mixed picture. The MACD shows bearish signals on the weekly timeframe but mildly bullish on monthly charts. The RSI indicates bullish momentum on weekly charts but provides no clear signal monthly. Bollinger Bands suggest bearish pressure on both timeframes, whilst moving averages show mildly bullish signals weekly. The KST indicator is mildly bearish weekly but mildly bullish monthly, reflecting the lack of clear directional conviction.
The stock faces immediate resistance at the 20-day moving average of ₹450.10, with major resistance at the 100-day moving average of ₹485.29. The 52-week high of ₹567.00 represents a significant hurdle. On the downside, immediate support lies at the 52-week low of ₹264.00, though a breakdown below current levels could test this support.
Delivery volumes have surged remarkably, with a 628.76% increase over the past month compared to the previous month. The one-day delivery of 119 shares represents 73.01% of total volume, significantly above the five-day average of 55.91%. This increased delivery-based buying suggests some genuine investor interest, though the absolute volumes remain minuscule, reflecting poor liquidity.
Investment Thesis: Quality and Fundamental Concerns Dominate
The investment thesis for Semac Construction is fundamentally challenged by persistent profitability concerns and weak long-term financial performance. The company's overall quality grade of "BELOW AVERAGE" reflects systematic issues with capital efficiency and earnings sustainability. The quality assessment notes that the company has "become very high compared to its past" in terms of valuation parameters, suggesting the current price is unjustified by fundamentals.
Key quality factors present a mixed picture. On the positive side, the company operates with minimal debt, maintains zero promoter pledging, and possesses a strong balance sheet in terms of solvency. The average net debt to equity ratio of -0.23 indicates a net cash position, providing financial flexibility.
However, critical weaknesses undermine the investment case. The five-year EBIT growth of -169.37% indicates a business in operational decline rather than growth. The average EBIT to interest coverage of -0.73x reveals that the company cannot service its interest obligations from operating profits. The average ROCE of 0.83% and average ROE of 7.35% demonstrate poor capital efficiency, with returns barely above risk-free rates.
The short-term financial trend for Q2 FY26 is classified as "POSITIVE," driven by the 103.51% growth in H1 FY26 sales and positive consolidated profit for the half-year. However, this positive assessment is undermined by concerning factors including the highest debt-to-equity ratio of 6.33 times, rising interest costs, and non-operating income constituting 348.28% of profit before tax.
The proprietary Mojo score of 29 out of 100 places Semac Construction firmly in "STRONG SELL" territory (score range 0-30). This score reflects weak long-term fundamental strength with a -169.37% CAGR growth in operating profits over the past five years. The previous score of 39 in June 2025 (rated "SELL") indicates marginal deterioration in the overall assessment.
Key Strengths & Risk Factors
KEY STRENGTHS
- Strong Revenue Growth: Net sales surged 76.20% YoY in Q2 FY26 and 103.51% in H1 FY26, demonstrating project execution capability
- Minimal Debt: Net cash position with average net debt to equity of -0.23, providing financial flexibility
- Zero Promoter Pledging: Eliminates concerns about forced selling or financial distress at promoter level
- Stable Promoter Holding: Consistent 62.85% promoter stake signals management commitment
- Sector Outperformance: 29.28% outperformance versus construction sector over past year
- Improved Margins: Operating margin of 2.01% represents recovery from deeply negative margins in previous quarters
- Positive Short-Term Trend: Financial trend classified as "POSITIVE" for Q2 FY26
KEY CONCERNS
- Profitability Collapse: Consolidated net loss of ₹0.01 crores in Q2 FY26 after ₹1.05 crores profit in Q1 FY26
- Weak Capital Efficiency: ROE of 7.35% and ROCE of 0.83% indicate poor returns on invested capital
- Operating Loss History: Five-year EBIT growth of -169.37% reveals systematic operational decline
- Rising Interest Burden: Interest costs surged 26.50% QoQ to ₹1.48 crores, eroding profitability
- Excessive Leverage: Debt-to-equity ratio spiked to 6.33x in H1 FY26, highest level recorded
- Other Income Dependency: Non-operating income represents 348.28% of PBT, indicating unsustainable earnings quality
- Zero Institutional Interest: No mutual fund or insurance holdings; total institutional holding just 0.04%
- Long-Term Value Destruction: Stock down 79.39% over two years and 44.58% over ten years
- Negative Operating Cash Flow: ₹2.00 crores negative cash flow from operations in FY25
Outlook: What Lies Ahead
POSITIVE CATALYSTS
- Sustained revenue growth above 50% YoY for three consecutive quarters
- Operating margins stabilising above 2% after years of negative margins
- Successful conversion of revenue growth into consistent quarterly profits
- Reduction in debt-to-equity ratio from current 6.33x to below 2x
- Improved operating cash flow generation turning positive consistently
RED FLAGS TO MONITOR
- Continued quarter-to-quarter profitability volatility and losses
- Further deterioration in operating margins below 2%
- Rising interest costs exceeding ₹1.50 crores per quarter
- Debt-to-equity ratio increasing beyond 6.33x or approaching 7x
- Negative operating cash flows persisting for more than two quarters
- Other income exceeding 300% of profit before tax consistently
- Any promoter stake reduction or pledging of shares
The outlook for Semac Construction remains highly uncertain. Whilst the company has demonstrated an ability to secure construction contracts and grow revenues, the persistent inability to translate this top-line growth into sustainable bottom-line profitability represents a fundamental business model challenge. The company operates in a highly competitive, margin-constrained industry where smaller players struggle to achieve economies of scale.
For the company to merit investment consideration, it must demonstrate at least four consecutive quarters of positive consolidated net profit with PAT margins exceeding 3%, reduction in debt-to-equity ratio to below 3x, and positive operating cash flow generation. Additionally, institutional investors would need to show interest through meaningful stake building, which would signal professional validation of the turnaround story.
Given the current trajectory, the most likely scenario is continued volatility in quarterly results, with intermittent profitable quarters offset by loss-making periods. The company's micro-cap status, combined with negligible institutional interest and poor liquidity, makes it unsuitable for most investors, particularly those with shorter investment horizons or lower risk tolerance.
The Verdict: Avoid This Value Trap
Score: 29/100
For Fresh Investors: Avoid initiating any position. The combination of inconsistent profitability, weak capital efficiency (ROE of 7.35%), excessive leverage (debt-to-equity of 6.33x), and long-term value destruction (down 79.39% over two years) makes this an unsuitable investment. The "RISKY" valuation assessment and "BELOW AVERAGE" quality grade underscore fundamental concerns that outweigh any short-term revenue growth momentum.
For Existing Holders: Consider exiting positions at current levels or on any rallies towards ₹450-₹485 resistance zones. The inability to sustain profitability despite strong revenue growth, combined with rising interest costs and deteriorating cash flows, suggests the turnaround remains elusive. The complete absence of institutional interest and catastrophic long-term track record warrant a defensive stance.
Fair Value Estimate: ₹300 (27.52% downside from current price of ₹413.85)
The stock merits reconsideration only after demonstrating four consecutive quarters of consolidated net profit exceeding ₹2.00 crores per quarter (implying PAT margins above 3%), debt-to-equity reduction below 3x, and positive operating cash flow generation. Until these conditions are met, the risk-reward profile remains decidedly unfavourable, with the company representing a classic value trap rather than a genuine turnaround opportunity.
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, and all investments carry risk of loss.
