SBC Exports Ltd Reports Mixed Quarterly Performance Amid Margin Pressures

Quarterly Financial Highlights: Revenue Growth and Profitability

The latest quarter saw SBC Exports achieve its highest-ever net sales figure of ₹104.45 crores, marking a significant milestone for the garment and apparel manufacturer. This robust revenue growth was accompanied by a record quarterly PBDIT of ₹11.81 crores and a PBT (excluding other income) of ₹7.59 crores, both the highest in the company’s recent history. The profit after tax (PAT) for the last six months also improved, standing at ₹22.57 crores, signalling operational efficiency in core business activities.

These figures underscore the company’s ability to capitalise on favourable market conditions and demand for garments, particularly in export markets. The garment sector’s cyclical recovery and SBC Exports’ focused product mix have contributed to this upswing. However, the financial trend score has declined slightly from 9 to 8 over the past three months, indicating a moderation in momentum.

Margin Expansion Challenges and Rising Costs

Despite the revenue and profit highs, SBC Exports faces margin headwinds. The return on capital employed (ROCE) for the half-year ended December 2025 has dropped to its lowest level at 11.28%, signalling that capital efficiency has deteriorated. This contraction in returns is partly due to increased interest expenses, which hit a quarterly high of ₹3.72 crores, reflecting the company’s elevated debt servicing costs.

The debt-equity ratio has climbed to 2.82 times, the highest in recent periods, indicating a heavier reliance on borrowed funds. This leverage increase raises concerns about financial risk, especially in a sector vulnerable to raw material price fluctuations and currency volatility. Additionally, the inventory turnover ratio has fallen to 3.23 times, the lowest in the half-year, suggesting slower inventory movement which could tie up working capital and pressure margins further.

Stock Performance and Market Comparison

SBC Exports’ stock price closed at ₹30.70 on 6 Feb 2026, up 1.19% from the previous close of ₹30.34. The stock touched a 52-week high of ₹30.89, reflecting strong investor interest. Over the past year, the stock has delivered an extraordinary return of 120.97%, vastly outperforming the Sensex’s 7.07% gain. The three-year and five-year returns are even more impressive at 386.05% and 3224.41% respectively, dwarfing the Sensex’s corresponding returns of 38.13% and 64.75%.

Shorter-term returns also highlight the stock’s momentum, with a 1-week gain of 6.71% compared to Sensex’s 1.59%, and a 1-month gain of 6.34% versus a Sensex decline of 1.74%. Year-to-date, SBC Exports has risen 8.98%, while the benchmark index has fallen 1.92%. This outperformance reflects strong investor confidence in the company’s growth prospects despite the emerging margin and leverage concerns.

Financial Trend Shift: From Positive to Flat

The company’s financial trend parameter, which had been positive, has now flattened, signalling a pause in the upward trajectory. The decline in the trend score from 9 to 8 over the last quarter reflects this moderation. While revenue and profit metrics remain strong, the deteriorating capital efficiency and rising debt levels are key factors weighing on the trend assessment.

Investors should note that the garment and apparel sector is subject to cyclical pressures and global trade dynamics, which can impact margins and working capital management. SBC Exports’ inventory turnover slowdown and increased interest burden highlight operational challenges that could constrain margin expansion in the near term.

Outlook and Market Positioning

SBC Exports continues to hold a Mojo Score of 64.0 with a Mojo Grade of Hold, upgraded from Sell on 29 Sep 2025. This reflects a cautious optimism among analysts who recognise the company’s strong revenue growth and market share gains but remain wary of margin pressures and financial leverage. The company’s market capitalisation grade stands at 4, indicating a mid-sized presence within the garments and apparels sector.

Given the stock’s stellar long-term returns and recent price strength, SBC Exports remains an attractive proposition for investors seeking exposure to the garment export segment. However, the shift in financial trend and rising debt metrics suggest that a watchful approach is warranted, with attention to margin recovery and working capital efficiency in upcoming quarters.

Investor Considerations

For investors, the key takeaway is the balance between SBC Exports’ impressive top-line growth and the emerging risks from margin compression and financial leverage. The company’s ability to manage working capital more efficiently and reduce interest costs will be critical to sustaining profitability improvements.

Moreover, the garment sector’s exposure to global economic conditions, currency fluctuations, and raw material price volatility means that SBC Exports must maintain operational agility. The current flat financial trend suggests that while growth remains intact, the pace of improvement may moderate until these challenges are addressed.

In comparison to the Sensex, SBC Exports has been a stellar outperformer over multiple time horizons, making it a noteworthy stock for growth-oriented portfolios. However, the Hold rating and recent downgrade from Sell to Hold by MarketsMOJO reflect a prudent stance, advising investors to monitor upcoming quarterly results closely.

Conclusion

SBC Exports Ltd’s December 2025 quarter marks a significant revenue milestone with record sales and profits, yet the company faces margin and leverage headwinds that have flattened its financial trend. While the stock’s long-term returns remain exceptional, the current environment calls for cautious optimism. Investors should weigh the company’s growth potential against operational challenges and evolving market conditions before making allocation decisions.

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