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Business News/ Markets / Stock Markets/  V-Guard Industries: 4 key reasons why Jefferies expects 19% upside for the stock post Q4 results
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V-Guard Industries: 4 key reasons why Jefferies expects 19% upside for the stock post Q4 results

Q4 Result: V-Guard share price having risen more than 47% in a year, is trading near 52-week high. As decent growth in Electrical, Electronics segment helped V-Guard's Q4, its consumer durables, Sunflame sales growth is rising. Here are 4 key reasons why Jefferies expects19% upside for the stock.

 V-Guard Industries: 4 key reasons why Jefferies expects 19% upside for the stockPremium
V-Guard Industries: 4 key reasons why Jefferies expects 19% upside for the stock

Q4 Results: V-Guard Industries share price has risen more than 47% in a year and is also trading near 52 week highs seen last week. The Q4 performance remained decent with uptick in sales for Electronics and Electricals segments as well as rising consumer durables and acquired Sunflame sales.  '

Strong growth in all segments

While Electricals segment contributing more than two-fifth to overall revenues and , comprising of  Wires, Pumps, Switchgears, Modular Switches, saw 10.7% growth, Electronics segment comprising– Stabilizers, UPS, Inverters contributing fourth to overall revenues also grew at a fester pace of 18.9% yoy. The pickup in summer sales of fans helped the Consumer durables segment, contributing fourth to overall revenues grow at a faster 27.9% yoy. Also acquired Sunflame range of products though contributing 5-6% to overall have started growing well as the segment marked a 28% growth 

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Decent Q4 results and growth

Q4 FY24 revenue increased by 17.9% YoY to Rs. 1,342.77 crore. Earnings Before Interest Tax Depreciation and amortisation (Ebitda) at Rs. 127.85 crore in Q4 FY24 grew 31.5% year on year, as compared to Rs. 97.21 crore in Q4 FY23.  Q4 FY24 net profit increased 44.5% YoY to Rs. 76.17 crore. 

With a strong performance analysts at Jefferies expect more than 19% upside to the stock

Key reasons

  1. Consumer durables drive growth- V-Guards Q4FY24 beat Jefferies estimates , with sales and net profit up by 18% and 44% year-on-year, led by consumer durables segment (up 27% in Q4 and 13% in FY24).
  2. Sunflame Integration- V-Guard is set to strengthen Sunflame's presence in E-commerce and South markets led by cross-selling opportunities, said analysts at Jefferies. Manufacturing synergies can improve going ahead feel analysts at Jefferies who estimate Sunflame to post 20% sales CAGR (compounded annual growth rate) 
  3. Margin improvement is sustainable- Facilities that make kitchen appliances and batteries have just started commercial production anf this will yield results in FY25. Also Compared to 45% (five years back), internal manufacturing has increased to 65%. and thus V-Guard can sustain gross margin improvement. Jefferies estimate V-Guard's operating margins will  expand to 10% in FY27 ( up 70 basis points over FY24) aided by synergies from Sunflame integration and optimizing mix, estimate analysts at Jefferies
  4. Rising geographical diversifications- V-Guard's geographical diversification strategy appears on track, said analysts at Jefferies as FY24 growth in Non-South markets stood at 14% YoY which  continues to outpace that in South ( up 11%). Non-South sales mix at 45.8% in FY24  has improved 60bps YoY.

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Jefferies expects V-Guard earnings to grow at compound annual growth rate of 30% over FY24-27 aided by Sunflame synergies, margin-accretive categories and higher in-house manufacturing, with  a 130bps increase in operating margins to 10% by FY27.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions

 

 

 

 

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ABOUT THE AUTHOR
Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 20 May 2024, 01:47 PM IST
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