Varroc Engineering Q2 Results Review - Steady India Performance; Debt-Reduction The Key: ICICI Securities
India business Ebitda margin at 9.8% was up 90 bps QoQ due to favorable product mix, better sourcing, operating leverage benefits.
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ICICI Securities Report
Varroc Engineering Ltd.’s adjusted Ebitda margin for Q2 FY23 came in at 9.2% against our estimate of 8.6%, with India operations margin at 9.8% and overseas 3%.
Revenue grew 12% QoQ to Rs 18.3 billion led by 17% QoQ rise in India business. Overseas revenue declined 20% QoQ largely due to production holidays in Europe.
India business Ebitda margin at 9.8% was up 90 bps QoQ due to favorable product mix, better sourcing and operating leverage benefits. Core India business is expected to further ramp up with revival in domestic two-wheeler demand as is being witnessed since October 2022 and given Varroc Engineering’s aim to grow at a 8-10% higher rate than the industry.
With more than a third of its orderbook from electric vehicle players, Varroc Engineering is focused on profitable growth with superior return on capital employed from its EV portfolio (traction motor, controller, DC-DC converter, etc.)
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