Varroc Engineering shares climbed 17% today. Here's why

Shares of Varroc Engineering Ltd, an auto component maker, climbed 17 per cent in Thursday's trade after the company reported a 37.5 per cent sequential rise in profit for the June quarter. Varroc Engineering reported a profit of Rs 55 crore against a profit of Rs 40 crore in March and a loss of Rs 3.9 crore in the year-ago quarter.

Varroc's sales for the quarter grew 10.4 per cent YoY at Rs 1,805.70 crore, which was ahead of the industry as supply to EV players gathered pace in the quarter. Ebitda margin improved 180 basis points to 10 per cent from 8.2 per cent YoY, driven by business mix, incentives & operating leverage, the company said.

Following the development, the stock jumped 17.15 per cent to hit a high of Rs 401.60 on BSE>

Varroc offers a wide range of electrical, electronics, lighting, polymer, metallic, after-market and advanced safety solutions.

“Speaking about the global economy, it has been more resilient despite monetary tightening by most of the central banks as core inflation remains above the target levels. Despite turmoil in the financial markets, we see a strong labour market and consumption in developed economies. The Indian economy on other hand has sustained its growth momentum in FY 2024 so far.  Core inflation has started to moderate which is helping RBI not to increase the interest rate

further thus supporting the economy," CMD Tarang Jain said.

Jain said his company's Ebitda  margin improved YoY due to improvement in Indian and overseas operations and certain incentives from the government. Sequentially,  Ebitda margin was up 50 bps, he said.

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"The ongoing monsoon and festive season will be key to watch out for the Automobile sector to continue its momentum. The reduction in fame II subsidy from 1st June 2023 for EV vehicles impacted EV volumes sharply but we are cautiously optimistic about the recovery in volumes in coming months.

Our focus will remain to strengthen our competitiveness in India and globally by developing world class products and services. We will enhance and leverage our global footprint as we are global company with strong roots in India," Jain said.

During the current financial year, our Varroc's business will continue to deliver growth and returns while maintaining strong fiscal discipline, Jain added.

 

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