LKP Research's research report on Tarsons Products
Tarsons Products standalone revenue grew by 3.6% YoY to ₹649 mn in Q1FY25 vs ₹626 mn in Q1FY24, while its consolidated revenues for Q1FY25 stood at ₹848 mn in Q1FY25 including revenue of ₹200 mn from Nerbe (acquired in Q4FY24) showing a growth of 35.5% YoY (down 19.8% QoQ). The company’s gross margin contracted 777bps YoY/123bps QoQ to 67.4%, impacted by product mix and weak domestic market. Its EBITDA dropped 10% YoY /36% QoQ to ₹218mn (excluding one-off expenses in Q1FY24 & Q1FY25), EBITDA margin dropped 838bps/295bps QoQ to 25.7% mainly on account of lower margins in Nerbe. Its Adj. PAT fell 27% YoY/32% QoQ to ₹70 mn (including provisions worth ₹30 mn). Tarsons has incurred capex of ₹3bn towards the Panchla plant and can generate revenues of ₹4bn at peak capacity in 3-5 years post commercialization.
Outlook
The company boasts strong cash flow from operations of ₹1,040 mn as of FY24 and a CFO/EBITDA ratio of 104% suggesting operating leverage. We maintain our ‘BUY’ rating, with a target price of ₹600 (46x FY26 EPS of ₹12.9).
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