V-Guard Industries Ltd. share price forecast

CDSL: CDSL delivered a strong quarter with 20% QoQ revenue growth (highest in the last seven quarters), led by growth in annual issuer charges and recovery in transaction income (one-month impact of higher activity). The company's annuity revenue stream has registered 39% YoY growth and contributes ~42% of revenue. The increase in annuity income provides growth stability and is led by increasing demat market share. We expect the growth to recover in FY24E, supported by (1) recovery in BO account addition, (2) higher transaction revenue driven by growth in delivery volume, and (3) continuity of growth in the annuity revenue stream. CDSL continues to be a market leader in the number of BO accounts, with a 73% market share and 85% incremental share. The insurance opportunity remains an option value and will aid growth subject to regulatory push. The investments in technology, rising regulatory and people cost will keep EBITDA margins in the 55-60% range. We have marginally changed our FY24/25E EPS estimates and maintain our BUY rating. We assign a SoTP-based target price of INR 1,470, based on 37x Jun-25E core PAT + net cash. Trent: Trent's topline growth continues to be stellar. Standalone revenue grew 53.5% YoY to INR25.4bn (HSIE: INR21.4bn). Zudio continues to anchor this exceptional growth. All fashion formats delivered 12% SSSG. The F&G format Star is also finding its bearings (33% YoY almost entirely SSSG-led) as it works to improve its value proposition/sales density. The change in mix and front-loading of expansion-related costs led to an EBITDAM contraction of 398bps (14.4%,...

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

V-Guard Industries: V-Guard continued to deliver a weak operating print with revenue (organic) up by 3% (HSIE 7%) and EBITDA contracting by 13% YoY (HSIE -9%), adjusting for Sunflame acquisition-related cost (INR 100mn). Electronics/Electrical revenue grew by 12/2%. ECD fell 3% YoY (impact of fan rating change) in comparison, Crompton/Havells/Orient reported +8/-14/-20%. South revenue fell by 3% while non-south grew 10% YoY. We believe V-Guard's aspiration of clocking 15% organic growth in FY24 looks stretched, given (1) weak consumer demand (2) disrupted summer season sales and (3) single-digit growth in the south market (55% of sales) as V-Guard is fully indexed there. The company is aggressively driving Sunflame sales in MT/E-com channels (under-indexed vs industry). Stability in RM prices and liquidation of high-cost inventory shall aid GM expansion. Still achieving a 10% EBITDA margin looks difficult due to high competition in non-south, slow south growth and continuous reinvestment. We cut EPS by 4/2% for FY24/FY25. We value the stock at 30x P/E on Mar-25E EPS to derive a TP of INR 235. Maintain REDUCE. Prestige Estates: Prestige Estates (PEPL) registered the highest-ever annual presales of INR 129bn (+24% YoY) on the back of 16msf of launches and robust presales in MMR at INR 27bn. On the back of this, non-Bengaluru sales increased to 41%, from 20% in FY22. For FY24, it expects to achieve 25% growth in annual presales over FY23. It expects to achieve this on the back of a strong launch pipeline of 76msf with higher contribution expected from Mumbai MMR and Hyderabad along...

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

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).

Birla Corporation: We maintain our BUY rating on Birla Corporation (BCORP), with an unchanged target price of INR 1,400/share (8.5x Mar-25E consolidated EBITDA). We continue to like BCORP for its large retail presence in the lucrative north/central regions and various cost-cutting initiatives. BCORP reported healthy 11/5% volume/NSR growth YoY. However, unit EBITDA fell 43% YoY on elevated fuel prices and operating losses at the Mukutban plant. On QoQ basis, Mukutban losses narrowed and BCORP also benefited from slight fuel cost reduction driving consolidated unit EBITDA recovery by ~INR 135/MT QoQ. We expect margin recovery to gain pace as fuel prices continue to trend down, continued ramp-up of the Mukutban plant and incentive accruals H2FY24E onwards. These along with no major near-term Capex should reduce gearing from FY24 onwards. Mahindra Lifespaces: Mahindra Lifespaces Developers Ltd (MLDL) reported stable presales of INR 4.5bn (+80/+30% YoY/QoQ, a tad below our estimate of INR 5bn), with the volume at 0.61msf (+90/+30% YoY/QoQ) on the back of 1.11msf of launches. 9MFY23 presales stand at INR 14.5bn (FY22 presales were at INR 10.2bn). Within IC&IC, the company leased 24.5acres for INR 690mn (-50%/+2% YoY/QoQ). On the back of strong demand for the projects Eden Kanakpura in Bengaluru and Happinest MWC in Chennai, MLDL took price hikes of 14% and 20% respectively on their new phase launches. In Jan'23, MLDL added INR 5bn of GDV from a society redevelopment project in Santacruz and INR 4bn from land in Hosur road, Bengaluru. With this FYTD23, GDV addition stands at INR 32bn. The BD pipeline...

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.

V-Guard’s planned acquisition of Sunflame is likely to be both earnings- accretive (in FY24E) and DCF-accretive. V-Guard’s two major segments – (1) stabilisers, and (2) UPS & battery – are likely to grow at low-to-mid single digits in tandem with improving availability of electricity across urban and rural markets.

V-Guard’s Q2FY23 print was largely similar to other listed peers.

V-Guard Industries: V-Guard delivered a mixed-bag performance, with revenue growing by 9% YoY to INR 9.8bn (in-line), while the EBITDA margin saw a miss. Net revenue registered a 17% three-year CAGR, with electronics/electrical segments growing 11/15%. CD clocked 24% three-year growth, better than Havells' and Crompton's, which were up 16% and 10% respectively. V-Guard's performance is better on account of the lower fan mix (which was impacted in the later part of Q2) in its CD portfolio. South and non-south delivered revenue growth of 13/22% three-year CAGR. Gross margin, at 28.6% (HSIE 29.5%), was down 231bps YoY due to the usage of high-cost inventory in wires. EBITDA declined 24% YoY (HSIE -4%), with margin at 7.2% (HSIE 9.2%). While high-cost RM inventory has largely been used up, the gross margin will improve gradually in H2FY23. We cut our FY23 EPS estimates by 4% to account for the miss on margin while maintaining FY24/25 estimates. We value the stock at 30x P/E on Sep-24E EPS to derive a target price of INR 240. Maintain REDUCE. Maruti Suzuki: Maruti Q2 PAT at INR 20.6bn came in above our estimate of INR 18.1bn, led by better-than-expected operational performance, higher other income, and a low tax rate. On the back of new launches, MSIL's order backlog has increased to record high levels of 412k units. Its commitment to recovering lost share in SUVs is reinforced by its four launches (new Brezza, Grand Vitara, and mid-cycle upgrades of Ertiga and XL6) in a span of four months. With a strong product...

We remain positive on V-Guard as we believe the ECD segment margin is likely to expand over FY23-24 due to (1) input price correction, (2) higher scale of operations and (3) better utilization of Roorkee plant and lower effect tax rate in FY24-25.