- 12 May 2022
- ICICIdirect Research
Butterfly reports disappointing financial performanceBUTTERFLY - 1135 Change: -8.30 (-0.73 %)
News: Butterfly Gandhimati (BGAL) revenue de-grew by 3% YoY to Rs. 199 crore on a high base (Q4FY21 reported all time high quarterly revenue in Q4). Gross margins declined by 1100 bps YoY to 30% on account of higher raw material cost and is among the lowest gross margin clocked by the company over last few years. Decline in gross margins and increase in employee cost to sales ratio by 292 bps and higher other expenses led to company reporting a loss of Rs. 17 crore at EBITDA level. An exceptional provision to the tune of Rs. 6.6 crore with respect to expected credit loss on receivables further negatively impacted the profitability. Consequently, the company reported a net loss of Rs. 19.4 crore during the quarter.
Views: The revenue de-growth in Q4FY22 is mainly owing to higher base of previous year (86% YoY growth in Q4FY21). Revenue for FY22 stood at Rs. 1005 crore (YoY growth of 16%), however net profit declined to ~ Rs.16 crore from Rs. 36 crore in FY21 on account of lower margin. Higher raw material prices probably have led to YoY decline in gross margin of the company. We await clarity on the pricing strategy to be adopted by the new management (Crompton Greaves Consumer Electricals which acquired 55% stake from erstwhile promoters and is further expected to progress on the mandatory open offer). On the balance sheet front, the company is comfortably placed with debt equity of ~ 0.2x for FY22, however we believe that taking a price hike would be crucial for the company to improve its gross margins to long term average levels of ~ 40%.