Sterling Tools Q2 FY27 Results (NSE: STERTOOLS)
Signal: Margin pressure
The read
The key inflection is revenue recovery without earnings recovery: consolidated revenue rose 20.4% YoY to ₹25,035.36 lakh, but gross margin compressed 1,126bps, EBITDA margin fell 347bps to 7.9%, and PAT fell 82.7% to ₹296.68 lakh; standalone PAT declined a milder 31.2% to ₹1,363.07 lakh, confirming subsidiary losses as the principal group-level drag.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹250.35 Cr | +20.4% | +17.0% |
| EBIT | ₹9.55 Cr | -31.0% | |
| Net profit | ₹2.97 Cr | -82.7% | |
| EPS | ₹0.82 | -82.7% | |
| EBIT margin | 7.9% |
P&L walk
Revenue recovered to ₹25,035.36 lakh, +20.4% YoY and +17.0% QoQ, but gross margin compressed to 56.7% from 67.9% and EBITDA fell 16.3% to ₹1,977.07 lakh, leaving PAT down 82.7% to ₹296.68 lakh.
Segments
The group has no reportable segments, but standalone PAT of ₹1,363.07 lakh versus consolidated PAT of ₹296.68 lakh shows subsidiaries dragged ₹1,066.39 lakh from quarterly earnings.
Key positives
- Consolidated revenue recovered to ₹25,035.36 lakh, growing 20.4% YoY and 17.0% QoQ after the recent decline in the prior-year base.
- Standalone revenue grew 32.9% YoY to ₹22,589.34 lakh, while employee benefits and other expenses grew 20.6%, providing some fixed-cost absorption at the parent level.
- Depreciation rose 2.3% YoY in H1FY27 while consolidated PP&E plus CWIP increased 3.8%, a clean depreciation-to-capex signal.
Key concerns
- Consolidated gross margin compressed 1,126bps YoY to 56.7% as raw-material cost increased to 44.7% of revenue from 37.9%; the filing does not disclose the cause.
- Consolidated EBITDA fell 16.3% YoY to ₹1,977.07 lakh despite 20.4% revenue growth, and EBITDA margin declined 347bps to 7.9%.
- Standalone PAT of ₹1,363.07 lakh converted to consolidated PAT of only ₹296.68 lakh, indicating ₹1,066.39 lakh of subsidiary drag.
- Consolidated operating cash flow was negative ₹2,104.01 lakh in H1FY27 versus positive ₹2,902.48 lakh in H1FY26, while net debt increased to ₹18,183.62 lakh.
- Finance costs rose 30.7% YoY to ₹315.20 lakh on consolidated borrowings of ₹18,917.12 lakh.
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