Varroc Engineering swings to profit on strong demand in March quarter

BENGALURU (Reuters) - India's Varroc Engineering Ltd 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.

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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 18.51 8.24 13.93 276.85 Buy 6 0.85 --

Ltd

Sona BLW Precision 50.63 29.50 32.71 46.40 Buy 16 0.96 1.16

Forgings Ltd

Motherson Sumi 34.54 22.83 15.78 36.62 Buy 11 0.88 1.10

Wiring India Ltd

Lumax Industries 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

 

(Reporting by Ashna Teresa Britto in Bengaluru; Editing by Varun H K)