- 28 Oct 2022
- ICICIdirect Research
V-GUARD REPORTS MIXED BAG PERFORMANCE IN Q2FY23
VGUARD - 380 Change: 1.50 (0.40 %)News:
Net sales of the company came in higher by 8.7% YoY in Q2FY23 to Rs 986.1 crore despite a higher base (wherein revenue grew by 45% YoY). Revenue growth was led by consumer durables segment consisting of fans, switchgear, kitchen appliances, water heaters. The segment revenue grew ~21% YoY to Rs 337.2 crore. Gross margin declined ~210 bps YoY mainly due to use of high-cost inventory in the electricals segment (mainly wire & cable segment). EBITDA margin declined 308 bps YoY to 7.4% as a result of decline in gross margin as well as sharp increase in other expenses (up by 22.3% YoY). PAT declined 26.5% YoY to Rs 43.7 crore as a result of lower EBITDA
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We believe margins for the quarter were impacted by sale of high cost wires inventory at relatively lower realisations due to fall in copper prices. In addition to this, advertisement expenditure being back to its pre-Covid level led to a sharp fall in the EBITDA margin to 7.4% (lower than its pre-Covid level EBITDA margin of ~9%). We await management commentary on demand outlook and EBITDA margin recovery, going forward, amid a fall in raw material prices
Impact:
Negative