India's Varroc Engineering swings to profit in Q4 on strong demand

Varroc Engineering

23/05/2023 10:39

BENGALURU, May 23 (Reuters) - India's Varroc Engineering Ltd  VARE.NS  on Tuesday reported a swing to
profit in the fourth-quarter, helped by growth in its automotive segment.
    The automotive component company's consolidated net profit stood at 396.2 million rupees ($4.8 million) for the
quarter ended March 31, from a loss of 2.85 billion rupees a year ago, it said in an exchange filing.
    Revenue from operations rose nearly 2.3% to 16.90 billion rupees, outpacing expenses, which grew 0.8%.
    Additionally, the board has resolved to seek enabling approval from shareholders for issuing non convertible
debentures for up to 5 billion rupees.
    For further result highlights, click  urn:newsml:reuters.com:*:nFWN37J1ZV
        
  
    WHY IT MATTERS
    Retail vehicle sales picked up during the quarter, as chip shortages eased and automakers launched more models.
Analysts have flagged that supply chain issues have eased significantly, with minimal impact on production volumes.
This in turn aided an increase in demand for automotive components.
    Varroc has posted a revenue growth of between 15% and 36% in the last three quarters, but with a net loss for
two of those quarters. Automotive companies have faced price pressures and higher costs during previous quarters,
which had offset demand. The company said its two-wheeler mobility segment saw a slowed growth, as exports were
impacted by geopolitical issues and domestic demand was impacted due to lower consumption in rural areas.
    
PEER COMPARISON
    
                                  Valuation(next 12    Estimates (next 12   Analysts' sentiment            
                                      months)               months)                                        
                      RIC        PE        EV/EBITDA  Revenue     Profit    Mean      # of      Stock to   Div
                                                      growth      growth    rating*   analysts  price      yield
                                                                                                target**   (%)
 Varroc Engineering    VARE.NS      18.51       8.24    13.93      276.85   Buy              6    0.85     --
 Ltd                                                                                                       
 Sona BLW Precision    SONB.NS      50.63      29.50    32.71      46.40    Buy             16    0.96         1.16
 Forgings Ltd                                                                                              
 Motherson Sumi        MSWI.NS      34.54      22.83    15.78      36.62    Buy             11    0.88         1.10
 Wiring India Ltd                                                                                          
 Lumax Industries      LUMA.NS      13.49       8.45    10.56      23.27    Strong           2    0.84         0.67
 Ltd                                                                        Buy                            
 
** The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of stock's last close to analysts' mean price target; a ratio above 1 means the stock is trading above
the PT
    
JAN-MARCH STOCK PERFORMANCE
    

-- All data from Refinitiv
-- $1 = 81.7800 Indian rupees



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Varroc shares vs peers    https://tmsnrt.rs/45sYk8m
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 (Reporting by Ashna Teresa Britto in Bengaluru; Editing by Varun H K)
 ((AshnaTeresa.Britto@thomsonreuters.com;))