Varroc Engineering Q1 Review - Operational Challenges Remain Sticky: ICICI Securities
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ICICI Securities Report
Varroc Engineering Ltd.’s Q1 FY22 operating performance was a miss on consensus estimates as Ebitda margin came in at 0.6% (down 292 basis points QoQ) and reported profit after tax loss of ~Rs 2.3 billion.
Global lighting business (Varroc Lighting Systems) sales fell 18% QoQ to €220 million as margins further shrunk 210 bps to down 2.8% (impacted by weaker mix and cost escalations).
Challenges to improvement in greenfield plant profitability remains a key concern for Varroc Engineering as the plants continue to be impacted by production issues, higher sourcing costs (e.g. electronics).
India business is expected to recover as domestic lockdowns ease and original equipment manufacturers witness demand improvement.
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