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  • 15 Jul 2022
  • ICICIdirect Research

BUTTERFLY GANDHIMATHI POSTS ROBUST SHOW IN Q1FY23

BUTTERFLY - 807 Change: 10.35 (1.30 %)

News: Butterfly Gandhimathi reported a healthy operational performance in Q1FY23. On a favourable base, revenue grew 76% YoY to Rs 253.5 crore with an impressive three year CAGR of 19%. Higher RM inflation during Q1FY23 continued to pressurise gross margins, which were at 35.5% vs. average 40-42%. However, better cost efficiencies and decline in other expenses (possibly owing to synergies kicking in post acquisition by Crompton) resulted in the company reporting strong EBITDA margins of 10.2% (up 470 bps YoY). Absolute EBITDA grew 3.2x (on a tepid base) to Rs 25.6 crore with a healthy three year CAGR of 30%. Tracking robust operational performance, the company reported PAT worth Rs 13.3 crore vs. Rs 0.9 crore in Q1FY22.

Views: Prices of key raw materials such as steel and aluminum have corrected by ~20% and 35%, respectively, in the past three months. This should provide some respite to gross margins, going forward. With gross margins normalising and synergies kicking in, BGAL could potentially clock in strong EBITDA margins of 12-14% (vs. historical average of ~7%). Furthermore, Crompton's acquisition would enable BGAL to access its strong dealer network in new geographies (mostly North India), which will enable it to penetrate these markets faster and accelerate its revenue growth.

Impact: Positive