IFB Industries Q1 Results Review - Margin Challenges Persist; Downgrade To Reduce: Yes Securities

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Yes Securities Report

IFB Industries Ltd.'s revenue grew 16.9% YoY (1.5% higher than estimates). Its home Appliances business registered muted revenue growth of 18.6%, while engineering services registered strong growth of 9.4%. Company’s overall gross margin contracted by 145 bps YoY on product mix moving towards AC which has lower margins.

Muted revenue growth in engineering segment is on back of slowdown in four wheelers and commercial vehicles. Its key category of washers has been facing demand challenges as industry has experienced negative growth. Room AC sales were impacted on back of supply constraints resulting in the revenue loss. Refrigeration production is ramping up swiftly and Q1 sales have been encouraging.

The company’s target is to reach sales of 50,000 units of refrigerator by September/October and aim to achieve significant OEM sales. Company’s aspiration of 10% margins in home appliances division continues to meet challenges and now management hopes margins will start improving from Q3 versus earlier expectation improvement in Q2.

On the engineering front company is looking for acquisition which will push up the growth. Considering the new launches in washers, refrigerators, and strong growth in RAC we believe the company can grow in double digits in FY25.

We however believe that achieve 10% margin would be challenge as company is facing demand challenges in key category of washers which has higher margins.

Considering margin challenges and renewed competition from Whrilpool in washers and aggressive stance adopted by BSH home appliances will rein in margins.

We downgrade the stock to Reduce with revised target price of Rs 1,811.

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Yes Securities IFB Industries Q1FY25.pdf

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Also Read: Whirlpool of India Q1 Review - Strong Results; Downgrade To Hold Due To Rich Valuations: ICICI Securities

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