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In-line performance; valuation discomfort remains
* VGRD reported in-line operating performance, driven by a strong rebound in Cables and Wires and other emerging categories like Switchgears and Kitchen Appliances. The UPS segment’s decline of 7% and sustained weakness in Pumps came as a negative surprise.
* Impact of extended winters was felt with only 8% yoy growth in Fans. Revenue growth from South was strong at 16% yoy, while it moderated in North with 6% growth. Strong Cable and Wires performance aided qoq margin expansion in the Electricals segment.
* Management maintained its 15% revenue growth target for FY20, with a rebound in key categories such as UPS and Pumps along with sustained growth in other segments. However, we have blended in 14% revenue CAGR from FY18-21E.
* We are already factoring in an EBITDA margin expansion of 70bps in FY20E. Our FY19-21E revenue/EBITDA/PAT CAGRs stand at 14%/21%/22%. Maintain Sell with an unchanged target price of Rs187 (32x FY21E EPS) on rich valuations.
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