VARROC ENGINEERING 2020-21 Annual Report Analysis

Wed, 31 Mar

VARROC ENGINEERING has announced its results for the year ended March 2021. Let us have a look at the detailed performance review of the company during FY20-21.

VARROC ENGINEERING Income Statement Analysis

• Operating income during the year rose 1.6% on a year-on-year (YoY) basis.
• The company's operating profit decreased by 51.7% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 3.5% in FY21 as against 7.4% in FY20.
• Depreciation charges increased by 22.3% and finance costs increased by 16.9% YoY, respectively.
• Other income grew by 28.5% YoY.
• Net profit for the year declined by 5791.6% YoY.
• Net profit margins during the year declined from 0.1% in FY20 to 5.9% in FY21.

VARROC ENGINEERING Income Statement 2020-21

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Net Sales	Rs m	111,219	113,028	1.6%
Other income	Rs m	989	1,271	28.5%
Total Revenues	Rs m	112,208	114,299	1.9%
Gross profit	Rs m	8,208	3,968	-51.7%
Depreciation	Rs m	7,319	8,951	22.3%
Interest	Rs m	1,392	1,626	16.9%
Profit before tax	Rs m	487	-5,338	-1,197.3%
Tax	Rs m	370	1,304	252.7%
Profit after tax	Rs m	117	-6,643	-5,791.6%
Gross profit margin	%	7.4	3.5
Effective tax rate	%	76.0	-24.4
Net profit margin	%	0.1	-5.9

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VARROC ENGINEERING Balance Sheet Analysis

• The company's current liabilities during FY21 stood at Rs 62 billion as compared to Rs 60 billion in FY20, thereby witnessing an increase of 2.7%.
• Long-term debt stood at Rs 9 billion as compared to Rs 9 billion during FY20, a growth of 4.0%.
• Current assets rose 4% and stood at Rs 43 billion, while fixed assets rose 1% and stood at Rs 67 billion in FY21.
• Overall, the total assets and liabilities for FY21 stood at Rs 110 billion as against Rs 108 billion during FY20, thereby witnessing a growth of 2%.

VARROC ENGINEERING Balance Sheet as on March 2021

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Networth	Rs m	30,045	30,279	0.8
Current Liabilities	Rs m	59,972	61,585	2.7
Long-term Debt	Rs m	9,002	9,361	4.0
Total Liabilities	Rs m	107,842	110,469	2.4
Current assets	Rs m	41,411	43,072	4.0
Fixed Assets	Rs m	66,431	67,397	1.5
Total Assets	Rs m	107,842	110,469	2.4

VARROC ENGINEERING Cash Flow Statement Analysis

• VARROC ENGINEERING's cash flow from operating activities (CFO) during FY21 stood at Rs 5 billion on a YoY basis.
• Cash flow from investing activities (CFI) during FY21 stood at Rs -6 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY21 stood at Rs -2 billion on a YoY basis.
• Overall, net cash flows for the company during FY21 stood at Rs -3 billion from the Rs 9 billion net cash flows seen during FY20.

VARROC ENGINEERING Cash Flow Statement 2020-21

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-20	Mar-21
Cash Flow from Operating Activities	Rs m	14,137	4,737	-66.5%
Cash Flow from Investing Activities	Rs m	-12,682	-6,440	-
Cash Flow from Financing Activities	Rs m	7,331	-1,522	-
Net Cash Flow	Rs m	8,876	-2,917	-

Current Valuations for VARROC ENGINEERING

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs -43.5, an decline from the EPS of Rs 0.9 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 364.7, stands at -8.4 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 1.8 times, while the price to sales ratio stands at 0.5 times.
• The company's price to cash flow (P/CF) ratio stood at 20.5 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Sales per share (Unadj.)	Rs	825.0	739.8
TTM Earnings per share	Rs	0.9	-43.5
Diluted earnings per share	Rs	0.8	-43.5
Price to Cash Flow	x	2.7	20.5
TTM P/E ratio	x	163.1	-8.4
Price / Book Value ratio	x	1.8	1.6
Market Cap	Rs m	52,873	47,299
Dividends per share (Unadj.)	Rs	3.0	0.0

Ratio Analysis for VARROC ENGINEERING

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 0.7x during FY21, from 0.7x during FY20. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at -2.3x during FY21, from 1.3x during FY20. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at -21.9% during FY21, from 0.4% during FY21. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at -9.4% during FY21, from 4.8% during FY20. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at -4.5% during FY21, from 1.4% during FY20. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Current ratio	x	0.7	0.7
Debtors’ Days	Days	36	53
Interest coverage	x	1.3	-2.3
Debt to equity ratio	x	0.3	0.3
Return on assets	%	1.4	-4.5
Return on equity	%	0.4	-21.9
Return on capital employed	%	4.8	-9.4

To see how VARROC ENGINEERING has performed over the last 5 years, please visit here.

VARROC ENGINEERING Share Price Performance

Over the last one year, VARROC ENGINEERING share price has moved up from Rs 129.5 to Rs 364.7, registering a gain of Rs 235.2 or around 181.6%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 21,095.8 (down 0.4%). Over the last one year it has moved up from 10,979.5 to 21,095.8, a gain of 10,116 points (up 92.1%).

Overall, the S&P BSE SENSEX is up 74.1% over the year.

(To know more, check out historical annual results for VARROC ENGINEERING and quarterly results for VARROC ENGINEERING)

Read: Latest Annual Report Analysis of VARROC ENGINEERING