Tarsons Products earned Rs. 29 crores in net profit.

Tarsons Products earned Rs. 29 crores in net profit.

On the high COVID-led base for Q1FY22, revenues fell 0.4% year on year. The total revenue was Rs 85 Cr and the net profit was Rs 29 Cr on a consolidated basis. The company reported a standalone revenue of Rs. 69 crore and a net profit of Rs. 20 crore.The operating profit was recorded at Rs. 44 Cr., with a pre-tax income of Rs. 39 Cr.

Margins shrink.

Domestic business fell around 6% YoY and 20% QoQ. The sequential decline was due to seasonality, with Q1 tending to be the weakest quarter. The company took a price hike in Q1FY23, which will begin to reflect in the next few quarters. The export business grew 11.1% YoY. This, coupled with elevated raw material prices, resulted in dragging gross margin down by 280bps YoY to 79.1%. The SG&A expenses grew 20.7% YoY, led by higher freight and promotion expenses. As a result, the EBITDA margin fell 760 basis points year on year (-680 basis points quarter on quarter) to 45.4%. The company expects to maintain healthy margins in the coming years thanks to improved product mix, increased contribution from new products, and in-house sterilisation, partially offset by higher costs associated with the start-up of new plants.

The PCR has received a good response from the customers in terms of quality. Specialised resin prices have stabilised, whereas packaging and paper costs have started declining. The revenues will be driven by growth in both domestic and export markets. We expect the company to maintain healthy margins in the coming years. The increased market share and strong growth in end-user industries will benefit the company. The major risk for the company is intensified competition and disruption in the distribution network.

Valuations:

The EPS was Rs. 5.54. The ROCE and ROE were at 35.3% and 27.4%, respectively. The stock was trading at a P/E ratio of 46x. The debt-to-equity ratio was 0.04x, whereas the asset turnover ratio was 0.72x. The interest coverage ratio stood at 33x. The scrip was trading at Rs.870, up by 1.02% on Thursday.