- 16 Aug 2022
- ICICIdirect Research
Rupa reports disappointing operational performanceRUPA - 204 Change: -5.75 (-2.75 %)
News: Rupa and Company reported a revenue decline of 2% YoY to Rs 215 crore in Q1FY23. Gross margins declined 135 bps Yoy to 37.4%. EBITDA margin were lower by 1072 bps YoY to 8.6% owing to other expense to sales ratio increasing by 808 bps YoY to 21% and employee cost to sales ratio increasing by 146 bps YoY to 8.1%. Absolute EBITDA declined by 56% YoY to Rs 19 crore. Higher interest expense (up 80% YoY) led to net profit being lower by 57% YoY to Rs 12.5 crore.
View: Flattish revenue growth with decline in gross profit margin and with expenses reverting back to normal has led to decline in EBITDA margins of the company. The decline in gross margin is mainly due to increased raw material (cotton) prices and the inability of the company to completely pass on the input cost hike as it caters to the price sensitive mass category consumers. The key monitorable will be the ability of the company to take calibrated price hikes to improve its gross margin profile. Also progress on improving the share of premium products which has remained stagnant over last few years would be critical in improving the margin profile of the company.