Varroc Engg slides as Q1 PAT tumbles 38% YoY to Rs 34 cr

Varroc Engineering slipped 3.16% to Rs 584.75 after the company's consolidated net profit (from continuing operations) dropped 38.09% to Rs 34.07 crore in Q1 FY25 as against Rs 55.03 crore reported in Q1 FY24.

The profitability of the company was impacted by negative operating leverage in overseas operation and start-up cost related to two new plants in Maharashtra.

However, revenue from operations grew by 5.16% to Rs 1,898.85 crore in Q1 FY25, driven by India business growth of 11.3%.

Profit before tax (from continuing operations) in Q1 FY25 was at Rs 55.99 crore, down 14.18% from Rs 65.24 crore recorded in Q1 FY24.

EBITDA stood at Rs 172.4 crore in the June quarter, registering a decline of 4.3% YoY. EBITDA margin reduced to 9.1% in Q1 FY25, as compared to 10% reported in the corresponding quarter previous year.

The companys revenue from Automotive business stood at Rs 1,859.89 crore (up 6.24% YoY) while income from other segments came in at Rs 38.96 crore (down 29.11% YoY) during the period under review.

Tarang Jain, CMD said, In Q1 FY25 strong domestic macro factors resulted in most of the automobile segments growing on YoY basis other than the CV segment. 2W grew by 19.6%, 3W grew by 9.4%, PV grew by 5.8%, CV de-grew by 1.4%. However, on QoQ basis, we saw de-growth in almost all segment other than 2W, primarily due to cyclical nature of the industry. 2W grew by 6.1%, 3W de-grew by 1.4%, PV de-grew by 10.3%, CV de-grew by 13.4%.

The overseas markets, especially the US & European market also showed negative growth for 2W. In the Asean region, the growth was largely driven by low-end segments and the premium segment continues to struggle for growth in this region. During Q1 FY25 the Company registered revenue of Rs.18,989 million with a 5.2% YoY growth. The Indian business reported a growth of 11.3%.

In Q1FY25, our lifetime new business win was over Rs 795.9 crore. The cumulative order wins are expected to result in annual peak revenue levels of around Rs 141.6 crore. Nearly 48% of our business win in the quarter has come from EV players. Our Revenue from supplying to EV players in Q1 FY25 was approximately 8% of our overall revenue.

We also continue to remain prudent in our capital allocation and exercise tight control on working capital and capex. This has resulted in net debt reducing by further 668 million in Q1 FY25 and our net debt to equity has improved to 0.59. Further, we continue to work across initiatives to achieve cost reductions across several categories of cost. We are also implementing various initiatives in the overseas markets also to reduce input costs and fixed costs.

The first phase of our renewable energy sourcing initiative is expected to result in 36.6 MWp of sourcing from solar power starting from Q2 of this year highlighting our commitment to sustainability. The board has further approved phase 2 to source another 14.00 MWp in this financial year.

Varroc Engineering design, manufacture, and supply exterior lighting systems, plastic and polymer components, electrical-electronics components, and precision metallic components to passenger car, commercial vehicle, two-wheeler, three-wheeler and off-highway vehicle ("OHV") OEMs directly worldwide.

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