IFB Industries Q1 FY27 earnings call

IFB Industries Limited reported a robust Q1 FY27, with total revenue reaching INR 1,529 crores, marking a significant 16.65% year-on-year growth compared to INR 1,311 crores in the previous year. PBDIT for the quarter stood at INR 88.46 crores, a 26.46% increase from INR 69.95 crores last year, with the PBDIT margin improving to 5.79% from 5.34%. Net profit after tax (PAT) surged by 50.08% to INR 38.06 crores, representing 2.5% of revenue.

The Home Appliances Division demonstrated strong performance, with revenues growing by 18% for the quarter, aligning with the company's aspiration for 20% growth. Management noted that this growth was achieved despite a conscious decision not to build stock of older-rated AC products, which were 10-15% cheaper, to transition to new, more expensive ratings. Volume growth was 9-10% for front-load washing machines, over 20% for top-load, and 6-8% for ACs.

The Engineering business recorded a 17% growth in sales and met all key performance indicators for the quarter. The segment has a long-term target of reaching INR 2,000 crores in revenue within 3-4 years, with a specific focus on the Stamping division targeting INR 1,000 crores supported by INR 400 crores in capex. However, a significant INR 150 crores Letter of Intent (LOI) from Tata for an EV battery project is currently under review due to reported issues within the Tata Group, creating uncertainty for this project.

The company continues to face challenges from persistent commodity and Forex cost increases, which have led to a 160 basis points decline in gross margin. While internal cost initiatives, including efficiency improvements and SKU rationalization (reducing front-loader models from 55-57 to 24-25 and halving washer SKUs), have helped mitigate some impact, the company has not been able to fully pass on these costs to customers through price increases. Management aims for INR 120-150 crores in cost savings for the year, having already achieved INR 42-43 crores in Q1.

IFB believes its market shares are improving across categories due to faster-than-market volume growth, particularly in front-load washing machines where it aims to be a top 2 player. For the AC segment, the company aspires to achieve a 7-10% market share. Management expressed an opinion that the PBDIT margin for the Home Appliances business should reach 'early double digit' levels in the long term.

The total capital expenditure planned for the full year is approximately INR 110 crores. This capex supports ongoing operations and strategic initiatives, including capacity enhancement for the Stamping division in Gujarat, Gurgaon, and Bangalore, which is crucial for achieving the INR 1,000 crores revenue target for that division.