- 11 Aug 2022
- ICICIdirect Research
Hikal reports washout quarter amid multiple headwindsHIKAL - 308 Change: 12.40 (4.20 %)
News: Revenues de-grew 17% YoY to Rs 379 crore with Crop protection declining 15% YoY to Rs 154 crore. Pharma de-grew 18%YoY to Rs 224 crore. EBITDA margins declined by 1496 bps YoY to 6% amid 1053 bps YoY decline in gross margins. EBITDA de-grew by 76% YoY to Rs 23 crore. Consequently, Hikal booked loss of Rs 9 crore in this quarter v/s profit of Rs 50 crore in Q1FY22. Delta vis-à-vis EBITDA was mainly due to higher interest cost and depreciation on account of assets additions.
View: Q1 was expected to be a weak period, however, Quarterly revenues and margins were significantly below our estimates. Pharma business witnessed channel inventory correction at customers’ end while crop protection was affected due to expected disruption in operations of Taloja plant. Rise in the input costs of raw materials, solvents, utilities and fuel has affected margins while focus now shifts on company’s ability to pass through these increases without much lag. We expect a step wise recovery in the upcoming quarters. Hikal continues to expand in both pharma, crop protection segments with separate focus and a calibrated approach but with strong headwinds due to the inflationary pressures and a sharp rise in input costs of raw material, energy and solvents, growth is likely to be tapered and margins contracting in FY23.