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Nirmal Bang Report
Johnson Controls-Hitachi Air Conditioning India (JCHAC) reported a disappointing 4QFY23 performance, with revenue down 21.1% YoY at Rs5.5bn. Cooling Products segment’s revenue declined by 21.7% YoY to Rs5.4bn (96.7% of total sales). Design & Development segment’s sales improved by 14.1% YoY to Rs182mn (3.3% of total sales). Gross margin expanded by 330bps YoY to 31.5%, most likely due to easing commodity cost pressures. EBITDA came in at Rs234mn, down 40.8% YoY. EBITDA margin contracted by 142bps YoY to 4.3%.
Cooling Products segment’s EBIT margin contracted sharply by 239bps YoY to 0.9%. Design & Development segment’s EBIT margin expanded by 87bps YoY to 12.1%. For 4QFY23, JCHAC reported an exceptional expense of Rs24mn mainly on account of termination benefits paid/payable to employees due to realignment/reorganization in certain areas. JCHAC reported adj. net profit of Rs14mn in 4QFY23, down 91.7% YoY. We believe that demand moderated in March’23 on account of weak consumer sentiment and unseasonal rains after pick-up in mid-Feb’23.
We expect demand to remain muted in 1QFY23 on account of unseasonal rains, weak consumer sentiment and high channel inventory across the industry. Margin headwinds for JCHAC are likely to persist over the near term. We continue to maintain ‘Under Review’ rating on JCHAC as we seek to better understand the company’s business.
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