Butterfly Gandhimathi - Company Update - ICICI Securities

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.

Valuation & Outlook

The performance during the festive period would be critical for revenues to gain momentum. The management has been focusing on increasing the share of non-traditional channels like e-commerce and large format stores. Non-traditional channels (e-commerce, LFS) continued to outpace traditional channels, with robust revenue growth of 83% YoY to Rs. 220.0 crore (32% of sales) in FY20. Revenues from the e-commerce space were at Rs. 145.0 in FY20 (vs. Rs. 45.0 crore in FY19). We model revenue de-growth of 18% in FY21 and growth of 22% in FY22. We expect a gradual improvement in margin profile and expect EBITDA margins to recover to 7.0% in FY22. However, this continues to be lower compared to its peers (EBITDA margin: 13-15%). 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 details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Butterfly_CoUpdate_Jun20.pdf

Shares of Butterfly Gandhimathi Appliances Ltd was last trading in BSE at Rs.120.85 as compared to the previous close of Rs. 126.5. The total number of shares traded during the day was 14399 in over 723 trades.

The stock hit an intraday high of Rs. 126.5 and intraday low of 120.45. The net turnover during the day was Rs. 1757366.

Source : Equity Bulls

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