Shalimar Paints Ltd. Q1 FY23 Result Updates. The crisis of the second wave of COVID-19 and other factors hampered profitability.

Shalimar Paints Ltd. Q1 FY23 Result Updates.

The crisis of the second wave of COVID-19 and other factors hampered profitability.

Shalimar Paints Ltd reported a net loss of 19.5 crores on account of the impact of increasing raw material prices. The company had posted a loss of Rs 10.6 crore for the April-June period a year ago.

The company has reported revenue of Rs. 109.9 crores from Rs. 105.5 in the previous quarter, growth of 4% QoQ, i.e., Q4 FY22 and 69% YoY at Rs. 65.2 crores from Q1 FY22. The company has recorded the highest sales in Q1 Vs Q1 YoY in the last 8 years. During this quarter company has grown by 22% in a decorative segment from the previous quarter, i.e., Q4 F22. During this quarter, the company has grown in the water base segment by 15% the previous year’s Q1 F22. In the coming quarters looking at the raw material trend, the company will decide on the future pricing strategy.

The earnings before interest, tax, depreciation, and amortization (EBITDA) stood at Rs. (1.8) crores as compared to 2.3 crores in the previous quarter and Rs. (8.8) crores in Q1 FY22.

The company has witnessed a disruption that had a devasting impact on the company’s performance. Despite the initial phase of reopening of the economy, the unforeseen challenges & crisis of the second wave of COVID-19 hit the pause button again.
Moreover, commodity prices too witnessed an unprecedented surge.
The company has felt the impact of increasing raw material costs over the past few quarters. Also, there has been some disruption in transport facilities leading to an increase in the freight cost. These all factors have impacted our profitability. The pandemic also brought about certain fundamental shifts in the industry.

An increase in prices of raw materials affected the performance.

 Over the last few quarters, raw material prices have seen an increasing trend, which has contracted the Gross profit impacting the overall profitability of the company. The prices of key raw materials have increased as compared to the previous quarter’s slide on the back of a steep inflationary trend and a sharp increase in commodity prices across the globe. The company was able to absorb the increased cost by passing on the cost to the EBIT consumers through an increase in average selling prices. However, due to competitive intensity need to absorb few costs internally impacting the margins of the company. The company is continuously working on improving its product mix within the segments, which will eventually help to reduce the impact of the increase in raw material costs on the company’s profitability. The company has maintained the fixed cost at the previous year’s level, however marginal is due to secondary freight on account of an increase in fuel prices.

The shares of Shalimar Paints Ltd. are trading at Rs. 165.30, up by 1.54%.

Valuations:

The return on equity (ROE) is -18% for the quarter ended June 2022. The return on capital employed (ROCE) for the company is -7.19%. The price to book value of Shalimar Paints Ltd. is 3.24. The EV/EBITDA is -108. EPS for the quarter is Rs. -9.