ICICI Direct's research report on Butterfly Gandhimathi
Revenues for the quarter grew significantly by 35.4% YoY to Rs 149.5 crore driven by strong growth across all segments. Kitchen appliances grew 37% YoY to Rs 114.4 crore whereas cooker/cookware segment grew 18% to Rs 22.0 crore. Gross margins declined sharply by 373 bps YoY to 40.4% mainly on account of substantial growth in non-traditional channel of sales that are less profitable. Positive operating leverage curtailed the EBITDA margin contraction, to a certain extent. Hence, EBITDA margins declined 180 bps YoY to 6.6%. Decline in depreciation cost and lower taxation rate aided the PAT (resultant PAT came in at Rs 1.1 crore vs. Rs 45 lakh in Q4FY18).
Outlook
The management is targeting revenue growth of ~ 15-20% over the next few years with a gradual improvement in margin profile, which continues to remain lower at ~ 7% compared to its peers (EBITDA margin: 13-15%). The key monitorable would be sustaining the growth and managing the working capital. We value the company on EV/sales and assign a multiple of 0.6x with a HOLD rating and a target price of Rs 190.
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