Butterfly Gandhimathi up 20% as CRISIL upgrades rating for bank facilities

The stock was locked in upper circuit of 20% at Rs 299 on the BSE, after the credit rating agency revised its outlook on the long-term bank facilities of the company to 'Positive' from 'Stable'.

Shares of Butterfly Gandhimathi Appliances were locked in the upper circuit of 20% at Rs 299 on the BSE, after the credit rating agency CRISIL revised its outlook on the long- term bank facilities of the company to 'Positive' from 'Stable’.

Till 03:00 pm, around 28,000 equity shares changed hands and there were pending buy orders for 6,989 shares on the BSE, the exchange data shows.

The stock of the leading manufacturer of kitchen and electrical appliances has rallied 22% in the past four trading days. In comparison, the S&P BSE Sensex was up 2% during the same period. The stock has surged 50% from its 52-week low of Rs 200 touched on October 10, 2018.

Butterfly Gandhimathi Appliances reported nearly three-fold year-on-year (Y-o-Y) jump in its net profit at Rs 76 million during first half (April-September) of financial year 2018-19 (FY19). The revenue was grown by 18% Y-o-Y at Rs 3.42 billion, across all the channel and geography in spite of Kerala flood. EBITDA (earnings before interest, tax, depreciation and amortization) margin improved from 5.4% to 7.9% during the period.

CRISIL said the revision in outlook reflects expected improvement in the operating performance in fiscal 2019, and over the medium term. Stability in the operating margin over the past four quarters through September 2018, and 7.69% for the six months of the current fiscal, reflect strengthening of the operating performance.

The margin is expected to remain comfortable at 7.5-8% over the medium term. Realisation of retention money receivables from Tamil Nadu Civil Supplies Corporation during first half fiscal 2019 was utilised to prepay a part of the long-term debt, thereby improving the cushion between cash accrual and debt obligation.

The company sells liquefied petroleum gas (LPG) stoves, pressure cookers, mixer grinders, and vacuum flasks under the Butterfly brand, which has been highly popular in India over the past two decades. Business is catered to retail and institutional segments.

CRISIL believes Butterfly Gandhimathi Appliances business risk profile will improve over the medium term, backed by its established position in the domestic kitchen appliance industry.

The ratings may be upgraded if continued improvement in operating margin and working capital cycle, results in better debt protection metrics (with interest coverage of more than 2.4 times) and capital structure (TOLTNW less than 2 times). The outlook may be revised to 'Stable' if lower-than-expected increase in revenue constrains capacity utilisation and profitability, thereby weakening debt protection metrics, it added.

Despite of its sharp run-up in past two months, the stock has underperformed the market by falling 45% thus far in the calendar year 2018. On comparison, the S&P BSE Sensex was 6% during the year.