Stock in Action- V-Guard Industries Ltd

Stock in Action- V-Guard Industries Ltd
Stock in Action- V-Guard Industries Ltd

Fundamental & Technical Analysis
by Tanushree Jaiswal Last Updated: Feb 28, 2024 - 05:27 pm 234 Views
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V-Guard Industries Ltd Stock Movement of the Day

V-Guard Industries Intraday Analysis

1- With Beta of 0.35 the stock is not sensitive to the market as a whole.
2- The stock is trading above the 5 days, 10 days, 20 days, 100 days Simple Moving Averages.

Probable Rationale Behind V-Guard Stock Surge 

V-Guard Industries Limited (NSE: VGUARD BSE: 532953) recently reported strong third-quarter numbers, surpassing revenue & earnings per share (EPS) estimates. Despite slight dip in EPS forecasts for next year, consensus price target remained steady. Top Electric Equipment company's performance reflects robust growth in net profit & revenue, driven by improved sales in consumer durables & electronics segments. Additionally, recent strategic moves, such as acquisition of Sunflame appliances & expansion into non-South markets, have bolstered investor confidence.

Financial Performance

Metric Dec-23 Dec-22 Dec-21
Net Sales (₹ crore) 1,078.26 1,071.86 977.23
Net Profit (₹ crore) 46.62 51.99 35.82
Earnings Per Share (Basic) (₹) 1.07 1.19 0.83

1. Analysis & Interpretation: Strong Financial Performance 

V-Guard witnessed 18.8% revenue growth in Q3, primarily driven by consolidation of Sunflame appliances. Company's net profit surged by 30.15%, reflecting efficient cost management & improved operational efficiency.

2. Strategic Acquisitions

Best Electric Equipment business leader’s acquisition of Sunflame appliances has contributed to revenue growth & market expansion. Despite previous decline in Sunflame's performance, V-Guard's management has successfully stabilized business & initiated growth strategies.

3. Geographical Expansion

V-Guard's entry into non-South markets & focus on increasing in-house manufacturing capabilities have diversified its revenue sources & enhanced profitability. Improved distribution channels & brand strength has facilitated market penetration.

4. Analyst Sentiment

Electric Equipment’s Analysts anticipate 17% increase in revenue & 38% rise in EPS for 2025. Although EPS forecasts for next year slightly declined post-earnings, consensus price target remained stable, indicating sustained investor confidence.

VGuards’ Conference Call Highlights- February 2024

Financial Performance
1. Q3 consolidated net revenue: INR 1,165 crores, up 18.6% YoY.
2. Q3 EBITDA: INR 102 crores, up 52% YoY.
3. Q3 Profit after tax: INR 58 crores, up 48% YoY.
4. Gross margin improved to 33.9% from 29.7% in Q3 last year.

Market Growth
1. Balanced growth observed in South & non-South markets.
2. Electronics segment recorded 16.7% YoY revenue growth.
3. Anticipating stronger top-line growth in upcoming quarter with summer season & demand revival.

Operational Updates
1. Commencement of production in Q4 for upcoming capacities in manufacturing units.
2. Margin improvement projects underway in ECD segment.
3. Initiatives in Sunflame to accelerate sales & enhance margins, with gross margin improvements noted.

Guidance
1. Expected growth range of 12.5% to 15% in ECD segment on blended basis.
2. Anticipated overall capex of INR 80 crores to INR 90 crores for next 2 years.

Challenges
1. Wire business facing pressure due to inflation across building product segments.
2. Capacity utilization at 68% to 70% in wire business, contributing 27% to 28% of total revenues.

V-Guard Strengths

1. Comfortable Financial Performance
V-Guard Industries Limited (VGIL) has demonstrated robust financial performance, with revenue growth of approximately 18% in FY2023, driven by increased sales & firm realization. Addition of new business, particularly through acquisition of SEPL, is expected to further bolster revenue growth in current fiscal year.

2. Established Presence & Diversified Product Portfolio
V-Guard boasts strong brand equity & diversified product portfolio in electrical & electronic products segment. With over four decades of presence, it has expanded its product profile to include 22 products. VGIL is market leader in stabilizers, with significant market share in various segments such as water heaters, solar water heaters, fans, pumps, & house wiring cables. Acquisition of Sunflame is expected to enhance its share in kitchen appliances segment.

3. Increasing Penetration into Non-South Markets
VGIL has been gradually expanding its presence in non-South markets, while traditionally South India-based player. It derived about 44% of its revenues from non-South markets in H1 FY2024, reflecting strategic push towards geographical diversification. acquisition of SEPL further strengthens its foothold in non-South markets.

V-Guards Credit Challenges

1. Vulnerability to Raw Material Price Fluctuations
VGIL's profit margins are susceptible to fluctuations in raw material prices & demand for its products. Exposure to commodity price fluctuations can lead to volatility in profit margins & cash flows. Despite improvements in operating margins & inventory position, this remains key challenge.

2. Intense Competition
VGIL faces intense price competition across most product categories due to presence of numerous organized & unorganized players. In segments where VGIL operates, significant portion of market is unorganized, adding to competitive pressures.

Liquidity Position: Adequate 

VGIL maintains adequate liquidity, supported by steady cash accruals relative to its debt servicing requirements. Debt incurred for acquisition of SEPL is expected to be repaid in FY2025 & FY2026. Healthy cash flow from operations & unutilized working capital lines are expected to bolster liquidity in near term.

Conclusion

V-Guard Industries' recent stock surge can be attributed to its robust financial performance, strategic acquisitions, & expansion initiatives. Despite challenges in consumer durables market, company's resilience & adaptability have positioned it for continued growth. Investor sentiment remains positive, supported by optimistic revenue forecasts & strategic investments in business expansion.

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About the Author

Tanushree is a seasoned professional with 6 years of experience in the Fintech and Edtech industry.

Disclaimer

Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
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