V-Guard Industries Ltd. share price target

Standalone revenue growth of 9.9% to Rs. 1,185 crore was led by strong performance in electronics (27.9%), while electricals and consumer durables had a moderate growth of 1.2% and 8.1% respectively. Standalone net profit was flat, hit by lower operating margins.

We maintain a Buy on V-Guard Industries with a revised PT of Rs 540, factoring in the growth from the Electronics, Electricals, and Kitchen appliances segments. V-Guard currently trades at 63x/48x/41x its FY2025/2026/2027 EPS, respectively.

Standalone net profit grew by 55% y-o-y, aided by a 23.2% y-o-y revenue growth and a 130 bps y-o-y rise in OPM. Gross margin improved by 220 bps y-o-y

Q4 topline up 18% YoY, fuelled by Consumer Durables segment, as the early onset of summer boosts overall performance

GCPL: Consistent volume growth; cut to HOLD post rally. JSP: Valuations overdone; downgrade to HOLD. ACC: Strong margins; cut to HOLD on full valuations. Bonds Wrap: Fortnightly review. Currency Outlook: Fortnightly forex review. VGRD: In-line quarter. ORIENTEL: Slow quarter; Hyderabad plant to spur growth. SOMC: Lacklustre demand dulls performance. MTLM: Strong performance on fast ramp-up of MDF plant. SRCM: Healthy quarter, expensive valuations

Takeaways from V-Guard’s Q2FY24: (1) gross margin is reverting to pre-covid levels (+449bps YoY in Q2FY24), (2) B2B segments have maintained healthy growth whereas B2C segments (Consumer durables) continued to report dismal performance, and (3) there is improvement in working capital.

V-Guard reported improvement in gross margins (+251bps YoY) due to commodity deflation similar to peers. However, we believe the key drivers for rerating of V-Guard would be (1) expected synergy benefits in distribution and sourcing and likely improvement in market shares for V Guard as well as Sunflame, (2) The consumer durables segment is EVA negative since FY22 due to lower margins.

All-round growth in Q1 led by non-South India markets that grew at 17% YoY

We believe there are three key factors which will likely help to drive rerating of V Guard: (1) successful integration with Sunflame and synergy benefits, (2) improvement in market shares of both these businesses as there will be higher resources available for brand building efforts post integration of Sunflame and (3) improvement in margins of V Guard (mainly Consumer durables segment).

Flat quarter despite growth in non-core markets; Q4 gross margin improved but EBITDA margin still under pressure

V-Guard’s Q3FY23 EBITDA margin of 6.7% was lowest in past 10 quarters. Change in revenue mix, discounting of non-star rated fans and high priced inventory impacted the margins.