Bhageria India reported a net profit of Rs. 2.38 cr.

The net sales were at Rs 108.12 crore in June 2022, down 4.33% from Rs 113.02 crore in June 2021. The quarterly net profit stood at Rs. 2.38 crore in June 2022, down 81.65% from Rs. 12.96 crore in June 2021. The EBITDA stands at Rs. 11.99 crore in June 2022, down 49.83% from Rs. 23.90 crore in June 2021.

Are retained earnings used effectively?

The company earned revenue of Rs.99.59 Cr from the chemical segment, Rs.8 Cr. from solar power and Rs.0.4 Cr. from other segments for the year ending in March 2021. The EBIT from the chemical segment was Rs. 2.43 Cr., Rs. 3.75 Cr. from the solar power segment and Rs. 0.86 from other. The company incurred a finance cost of Rs. 1.08 cr. and other unallocated expenditure of Rs. 2.38 cr. The surplus current assets suggest that Bhageria Industries has a conservative balance sheet and could probably eliminate its debt without much difficulty. Succinctly put, Bhageria Industries boasts net cash, so it’s fair to say it does not have a heavy debt load.

Any business needs free cash flow to pay off debt; accounting profits just don’t cut it. Bhageria Industries has net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Bhageria Industries created free cash flow of 14% of its EBIT. That level of cash conversion undermines its ability to manage and pay down debt. While it is always sensible to investigate a company’s debt, in this case, Bhageria Industries has 152.4m in net cash and a decent-looking balance sheet. So we are not troubled with Bhageria Industries’s debt use. However, not all investment risk resides on the balance sheet.

Valuations:

EPS is at Rs.0.55 for the June quarter as compared to Rs.4.17 in the March quarter and Rs.2.39 in the June 2021 quarter. The ROCE and ROE are at 19.2% and 14.7%, respectively. The EBITDA stood at 6.48x while the price to book ratio was at 1.46x. The stock was trading at a P/E ratio of 12.3x. The scrip was at Rs.170 on Thursday, up by 0.18%.