Buy V-Guard; target of Rs 253: HDFC Securities

June 13
18:25 2018

HDFC Securities’s research report on V-Guard

V-Guard’s 4QFY18 like-like revenues grew by healthy 13/15% in 4QFY18/FY18 despite weak summer (exp. 15%). Weak summer also impacted slower gross margin expansion (174bps vs. 272bps exp.) coupled with higher than expected one-time ad expense (Rs 350mn). Adjusted EBITDA/APAT grew by 28/39%.  V-Guard continued to conquer newer regions, away from its fortress (south region) with non-south (39% of revenues) growth at 27% in 4QFY18, while south growth at a modest 5%. The growth was led by kitchen appliances, fans, switchgears, digital UPS and new launches (air coolers, modular switches and LED fans). Stabiliser (high margin) growth was muted during the quarter owing to weak air conditioner offtake.


We foresee EPS CAGR of 38% over FY18-20E. We value V-Guard at 35x P/E on Mar-20EPS, with TP of Rs 253. We maintain BUY.

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