ICICI Direct's research report on Butterfly Gandhimathi
Q4FY20 has been characterised by demand disruption in second half of March due to national lockdown announced due to spread of Covid-19. Butterfly Gandhimathi (BGAL) reported weak Q4FY20 results, with revenues down 26% YoY to Rs 110.6 crore (as per management, BGAL lost revenue worth Rs 40 crore due to Covid-19 disruptions). Kitchen appliances revenues declined 27% YoY to Rs 83 crore while cooker/cookware revenues declined 6% to Rs 21 crore. Gross margins improved 397 bps YoY to 44.3% owing to a favourable product mix and benign RM prices. However, given the fixed cost nature of the business (negative operating leverage), the company reported EBITDA loss of Rs 4.5 crore (vs. EBITDA profit of Rs 9.9 crore in Q4FY19). Consequently, BGAL reported a net loss of Rs 7.7 crore.
Outlook
The key monitorable would be revenue recovery, sustaining the growth and managing the working capital. We value the company on EV/sales and assign a multiple of 0.5x. We maintain HOLD rating with a revised target price of Rs 130 (previous target price: Rs 165).
For all recommendations report, click here
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