SMS Pharma. Q4 FY26 Results (NSE: SMSPHARMA)
Signal: Revenue declined
The read
Revenue declined 4% YoY to ₹237.95 Cr in Q4FY26, but consolidated net profit surged 61% YoY to ₹32.71 Cr, driven by a huge jump in associate income to ₹11.75 Cr (from ₹0.23 Cr), which masks a 5% drop in operating profit. Gross margin expanded 290bps YoY to 44.0%, a tailwind from raw material cost reduction. However, employee costs rose 165bps as % of sales. For FY26, revenue grew 13.3% to ₹886.87 Cr and PAT attributable to shareholders ₹101.99 Cr (up 47.5%), with EPS at ₹11.15 (up 36.6%, diluted by warrant conversion). Core operating performance remains solid but the earnings beat is largely from the associate.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹237.95 Cr | -4.13% | +13.07% |
| EBIT | ₹32.34 Cr | -3.71% | |
| Net profit | ₹32.71 Cr | +61.03% | |
| EPS | ₹3.58 | +49.17% | |
| EBIT margin | 17.85% |
P&L walk
Revenue declined 4% YoY, but gross margin expanded 290bps on lower raw material costs. Employee costs rose faster than revenue, squeezing EBITDA margin which still improved 84bps YoY. The massive 50x jump in associate profit lifted PAT far above operating profit.
Key positives
- Gross margin expanded 290bps YoY to 44.0% in Q4, driven by lower raw material costs (material cost % of revenue down from 58.8% to 55.8%).
- Consolidated net profit grew 61% YoY in Q4, with EPS up 49% to ₹3.58.
- Full-year revenue growth of 13.3% to ₹886.87 Cr, with PAT up 47.5%.
- Debt/equity remains manageable at 0.46 (standalone) and net debt increased but funded by capex.
Key concerns
- Q4 revenue declined 4% YoY, indicating possible volume or pricing pressure.
- Associate income of ₹11.75 Cr in Q4 (vs ₹0.23 Cr) is the primary driver of PAT growth; core PBT declined 5% YoY, suggesting earnings quality is weak.
- EPS growth (36.6% FY) lagged PAT growth (47.5%) due to equity dilution from warrant conversion, impacting per-share returns.
- Inventory days increased to 220 from 201, indicating higher working capital lock-up.
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