Interloop Limited (ILP) earnings decline by more than 50%

Sherman Securities has just released an update on Interloop Limited’s recent quarterly results. Here are the important points from the earnings announcement:

Performance Overview

Interloop Limited (ILP) reported net earnings of Rs4.1 billion (EPS of Rs2.95) for 3QFY24, compared to Rs9.6 billion (EPS of Rs6.84) in the same period last year. This performance is in line with expectations.

Revenue Growth

• Revenue Surge: ILP’s revenue surged by 25% year-on-year (YoY) to Rs39 billion during 3QFY24. This growth was primarily driven by rupee devaluation and increased global demand.

Margin Analysis

• Gross Margin Decline: The company’s gross margin was 29%, down from 47% in the same period last year, representing an 18% percentage point decrease. This decline is attributed to higher cotton prices, elevated energy costs, and increased depreciation expenses due to a newly commenced apparel plant.

Operating Costs

• Cost Increase: Operating costs rose by 22% YoY in 2QFY24, mainly due to higher distribution costs (up by 44% YoY) and administrative expenses (up by 47% YoY).

Financial Indicators

• Finance Costs: Finance costs increased significantly to Rs2.7 billion, up by 2x YoY, driven by higher borrowings and prevailing elevated interest rates.

Sequential Performance

• Earnings Growth: Sequentially, earnings rose sharply by approximately 38% YoY, primarily due to improved gross margins resulting from inventory gains and higher volumetric sales.

Risks to Valuation

Risks impacting valuation include interest rates, electricity costs, and cotton prices.

Disclaimer

The information in this article is based on research by Sherman Securities. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.