Godavari Biorefineries' (NSE:GODAVARIB) Earnings May Just Be The Starting Point

The subdued stock price reaction suggests that Godavari Biorefineries Limited's (NSE:GODAVARIB) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Godavari Biorefineries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₹512m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Godavari Biorefineries took a rather significant hit from unusual items in the year to September 2025. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Godavari Biorefineries.

An Unusual Tax Situation

Having already discussed the impact of the unusual items, we should also note that Godavari Biorefineries received a tax benefit of ₹196m. This is meaningful because companies usually pay tax rather than receive tax benefits. The receipt of a tax benefit is obviously a good thing, on its own. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.

Our Take On Godavari Biorefineries' Profit Performance

In its last report Godavari Biorefineries received a tax benefit which might make its profit look better than it really is on a underlying level. Having said that, it also had a unusual item reducing its profit. Based on these factors, we think that Godavari Biorefineries' profits are a reasonably conservative guide to its underlying profitability. So while earnings quality is important, it's equally important to consider the risks facing Godavari Biorefineries at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Godavari Biorefineries (including 2 which can't be ignored).

Our examination of Godavari Biorefineries has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.