Strong topline growth; input cost inflation drags profitability for V-GuardVGUARD - 243 Change: 7.60 (3.23 %)
News: Net sales increased 16% YoY to Rs.967 crore led by strong sales growth in the ‘Consumer durables’ and ‘Electricals’ segment to 28% and 18% YoY, respectively. However, EBITDA margin declined sharply by 487 bps YoY to 9% led by higher raw material costs and advertisement expenses. PAT declined by 31% YoY to Rs.54 crore tracking lower EBITDA margins and higher depreciation expenses.
Views: Q3FY22 EBITDA margin was hit by 1) higher raw material costs 2) restoration of key A&P spends 3) low operating leverage of new plants. We believe, the EBITDA margin is coming back to its normalise level of 9-10% vs 14% reported during Q3FY21. While industries is looking to take price hikes in the coming months, we await management commentary on demand outlook of its key products in the coming quarters.