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  • 17 Oct 2022
  • ICICIdirect Research

Butterfly reports muted Q2 performance on higher base

BUTTERFLY - 1054 Change: 61.85 (6.24 %)

News:

 Butterfly's revenue declined ~5.1% YoY to Rs 367.8 crore on a higher base. On a three-year basis, Butterfly's revenue grew at a CAGR of 15.1% led by its gas stoves, pressure cookers and mixer grinders product categories. Gross margin came in at 35.3%, up by 98 bps YoY. However, EBITDA margin contracted to 11.2% vs 11.8% in Q2FY22 led by higher inventory cost and employee expenses. PAT declined marginally by ~1.3% YoY.

View:

 We believe Butterfly's Q2 performance was marginally weak on a higher base. Higher inventory and raw material costs impacted the EBITDA margin of the company. Although Butterfly's Q2 EBITDA margin at 11.2% is higher than its pre-Covid EBITDA margin level of 8.8% as a result of improved operating leverage. However, on the gross margin front, the company is yet to return to its pre-Covid margin level of 40-42% compared to 35.3% in Q2FY23. The company's other income came in at ~Rs 3.6 crore vs. ~Rs 0.4 crore in Q2FY22 as well as Q1FY23. We await commentary of management on future margin guidance as well as demand outlook, going forward. Although the performance was muted on a YoY basis, it came in better tham our estimates.

Impact:

Positive.