- 03 Feb 2022
- ICICIdirect Research
STRONG TOPLINE GROWTH; INPUT COST INFLATION DRAGS PROFITABILITY FOR V-GUARD
VGUARD - 420 Change: -1.75 (-0.42 %)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.
Impact: Neutral