- 04 Aug 2023
- ICICIdirect Research
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LOWER EXPLOSIVE REALISATIONS AND SUBDUED EXPORTS GROWTH LED TO MUTED PERFORMANCE
News: Revenue growth was muted at 4.1% YoY (-12.8% QoQ) to ₹ 1682.2 crore in Q1FY24 as the performance of major segments like explosives (45% of revenue) and exports (36% of revenue) remained subdued during the quarter. Explosives segment revenue declined by 8.1% YoY (-16.1% QoQ) to ₹ 758 crore as volume growth of 12.6% YoY (-4.2% QoQ) was negated by fall in realisations (-18.4% YoY, -12.4% QoQ). Exports revenue was also up by only 2.1% YoY (down 17.9% QoQ) to ₹ 605 crore. However, revenue for defence segment and initiating systems segment were strong at 142.4% YoY and 43.5% YoY respectively. Gross margin at 42.8% improved significantly by 883 bps YoY (+453 bps QoQ) led by lower raw material (ammonium nitrate) prices. EBIDTA margin improved by 169 bps YoY (+67 bps QoQ) to 19.2% leading to EBITDA growth of 14.2% YoY to ₹ 323.1 crore. PAT was up 10.4% YoY to ₹ 201.6 crore.
Views: Overall Q1FY24 numbers was below expectations mainly on account of subdued performance in explosives and exports segments. Though explosive volume growth of ~13% YoY was largely in-line but significant fall in explosives realisations and only 2% YoY growth in exports were key negative surprises. Moreover, considerable improvement in EBITDA margin was not there despite significant improvement in gross margins on lower ammonium nitrate prices. In defence segment (9% of revenues), order backlog remains strong at ₹ 1054 crore (2.7x FY23 defence revenue), giving strong revenue growth visibility in defence. Going ahead, explosives volume growth is expected to remain healthy but explosives realisations and growth in exports segments would be the key things to watch out for in coming quarters.
Impact: Neutral