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- 15 Feb 2023
- ICICIdirect Research
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TCNS REPORTS DISMAL OPERATIONAL PERFORMANCE
News: TCNS reported revenue de-growth of 7% YoY to Rs 306 crore (down 13% QoQ). As compared to pre-Covid levels, revenue recovery rate stood at 93% which is significantly lower compared to other apparel and lifestyle categories. The company has been able to maintain gross margin in line with pre-Covid levels at 68% (up 50 bps YoY). However, EBITDA margins declined 620 bps YoY to 13% (down 20 bps QoQ, Q3FY20: 20.6%) and still trending significantly lower than pre-Covid level owing to negative operating leverage. Absolute EBITDA stood at 59% of pre-Covid levels at Rs 40 crore (down 37% YoY). Higher depreciation (up 28% YoY), and interest expense (up 41% YoY) with lower other income (down 19% YoY) led to PAT declining by 98% YoY to Rs 0.5 crore.
Views: The Q3FY23 revenue performance is disappointing as inspite of it being a undisrupted festive quarter the company has not been able to report a growth over pre-Covid levels. Internal product related issues (failure of recently launched ‘W’ range) led to lower acceptance from customers which has resulted in subdued revenues. Also accelerated shift from B2B to D2C in Q3FY23 impacted reported sales due to negligible primary billing and higher proportion of secondary billing. The company witnessed meaningful decline in demand post Diwali which negatively impacted the revenues. The company’s north and east regions revenue performance was below pre-Covid level and impacted the revenue growth. Lower than pre-Covid level on both revenue and profitability is a cause of concern and improvement in both these parameters would be a key monitorable for improvement in the company’s performance.
Impact: Negative