VARROC ENGINEERING 2022-23 Annual Report Analysis

Wed, 30 Aug

VARROC ENGINEERING has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during FY22-23.

VARROC ENGINEERING Income Statement Analysis

• Operating income during the year rose 17.4% on a year-on-year (YoY) basis.
• The company's operating profit increased by 53.8% YoY during the fiscal. Operating profit margins witnessed a fall and down at 8.0% in FY23 as against 6.1% in FY22.
• Depreciation charges increased by 10.6% and finance costs increased by 60.8% YoY, respectively.
• Other income grew by 70.6% YoY.
• Net profit for the year declined by NA YoY.
• Net profit margins during the year grew from 1.3% in FY22 to 0.6% in FY23.

VARROC ENGINEERING Income Statement 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Net Sales	Rs m	58,442	68,631	17.4%
Other income	Rs m	339	579	70.6%
Total Revenues	Rs m	58,781	69,209	17.7%
Gross profit	Rs m	3,589	5,520	53.8%
Depreciation	Rs m	3,045	3,367	10.6%
Interest	Rs m	1,184	1,903	60.8%
Profit before tax	Rs m	-301	829	NA
Tax	Rs m	482	441	-8.6%
Profit after tax	Rs m	-783	388	NA
Gross profit margin	%	6.1	8.0
Effective tax rate	%	-160.4	53.2
Net profit margin	%	-1.3	0.6

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VARROC ENGINEERING Balance Sheet Analysis

• The company's current liabilities during FY23 down at Rs 29 billion as compared to Rs 30 billion in FY22, thereby witnessing an decrease of -5.1%.
• Long-term debt stood at Rs 4 billion as compared to Rs 3 billion during FY22, a growth of 66.4%.
• Current assets rose 24% and stood at Rs 18 billion, while fixed assets rose 6% and stood at Rs 28 billion in FY23.
• Overall, the total assets and liabilities for FY23 stood at Rs 46 billion as against Rs 110 billion during FY22, thereby witnessing a fall of 58%.

VARROC ENGINEERING Balance Sheet as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	19,887	9,762	-50.9
Current Liabilities	Rs m	30,290	28,743	-5.1
Long-term Debt	Rs m	2,500	4,161	66.4
Total Liabilities	Rs m	109,890	46,139	-58.0
Current assets	Rs m	14,282	17,763	24.4
Fixed Assets	Rs m	26,781	28,376	6.0
Total Assets	Rs m	109,890	46,139	-58.0

VARROC ENGINEERING Cash Flow Statement Analysis

• VARROC ENGINEERING's cash flow from operating activities (CFO) during FY23 stood at Rs 7 billion, an improvement of 3.9% on a YoY basis.
• Cash flow from investing activities (CFI) during FY23 stood at Rs -3 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY23 stood at Rs -2 billion, an improvement of 35% on a YoY basis.
• Overall, net cash flows for the company during FY23 stood at Rs 221 million from the Rs -5 billion net cash flows seen during FY22.

VARROC ENGINEERING Cash Flow Statement 2022-23

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-22	Mar-23
Cash Flow from Operating Activities	Rs m	6,356	6,606	3.9%
Cash Flow from Investing Activities	Rs m	-7,625	-2,601	-
Cash Flow from Financing Activities	Rs m	-3,349	-2,160	-
Net Cash Flow	Rs m	-4,612	221	-

Current Valuations for VARROC ENGINEERING

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 2.5, an improvement from the EPS of Rs -5.1 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 429.5, stands at 80.3 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 6.7 times, while the price to sales ratio stands at 1.0 times.
• The company's price to cash flow (P/CF) ratio stood at 14.9 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Sales per share (Unadj.)	Rs	382.5	449.2
TTM Earnings per share	Rs	-5.1	2.5
Diluted earnings per share	Rs	-5.1	2.5
Price to Cash Flow	x	23.4	14.9
TTM P/E ratio	x	-67.9	80.3
Price / Book Value ratio	x	2.8	5.7
Market Cap	Rs m	54,889	56,103
Dividends per share (Unadj.)	Rs	0.0	0.0

Ratio Analysis for VARROC ENGINEERING

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 0.6x during FY23, from 0.5x during FY22. 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 improved and stood at 1.4x during FY23, from 0.7x during FY22. 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 improved and stood at 4.0% during FY23, from -3.9% during FY23. 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 improved and stood at 19.6% during FY23, from 3.9% during FY22. 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 improved and stood at 5.0% during FY23, from 0.4% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Current ratio	x	0.5	0.6
Debtors’ Days	Days	32	32
Interest coverage	x	0.7	1.4
Debt to equity ratio	x	0.1	0.4
Return on assets	%	0.4	5.0
Return on equity	%	-3.9	4.0
Return on capital employed	%	3.9	19.6

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 346.1 to Rs 429.5, registering a gain of Rs 83.5 or around 24.1%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 45,179.6 (up 0.5%). Over the last one year it has moved up from 32,224.8 to 45,179.6, a gain of 12,955 points (up 40.2%).

Overall, the S&P BSE SENSEX is up 12.8% over the year.

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