- 08 Nov 2023
- ICICI Securities
REVENUE GROWTH REMAINS STRONG ON BETTER EXECUTION BUT MARGINS CONTRACTED SHARPLY
MIDHANI - 392 Change: 51.05 (14.96 %)News: Revenue increased by 25.7% YoY (+21.2% QoQ) to Rs 227.5 crore in Q2FY24, led by execution of healthy order backlog. However, gross margin contracted sharply to 62.5% (vs 93.4% in Q2FY23 and 73.5% in Q1FY24) on account of sharp increase in raw material cost. EBITDA margin contracted by 1646 bps YoY (-617 bps QoQ) to 16.0% despite some positive operating leverage. Subsequently, EBITDA declined by 38.1% YoY (-12.6% QoQ) to Rs 36.3 crore. PAT declined by 58.5% YoY (-25.5% QoQ) to Rs 13.9 crore.
Views: Revenue growth remained strong led by ramp up of recent capacity expansions and execution of healthy order backlog. Order inflows during H1FY24 are at Rs 581 crore with order backlog stands at Rs 1501 crore as of Sept 2023 end (1.5x TTM revenues). H1FY24 revenue growth stands at ~40% YoY. However, sharp contraction in margins was a key negative surprise (EBITDA margin stands at 18.7% in H1FY24 vs 31% in H1FY23). Going ahead, revenue growth visibility remains strong as the large part of current order backlog is to be executed in short to medium term. Order pipeline also remains strong for company’s products like superalloys, titanium alloys and other products. Overall, we believe that, though revenue visibility remains healthy, margin trajectory will be the key thing to watch-out for in the coming quarters.
Impact: Negative