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V-Guard Industries Ltd

* V-Guard Industries started its operations in 1977 at Kochi to manufacture and market Voltage stabilizers. It is a strong player in south India and has a strong brand name. Since inception it has aggressively diversified its portfolio to become a multi-product company catering to the Light Electricals sector manufacturing Invertors & Digital UPS systems, Pumps, House wiring cables, electric & solar water heaters, fans, etc. The company has manufacturing facilities at Coimbatore in Tamil Nadu, Kashipur in Uttaranchal and Kala Amb in Himachal Pradesh. It has a network of 31 branches spread across ~40,000+ retailers.

* The company posted strong numbers for Q3FY21 led by healthy festive demand and strong recovery of consumer demand. It gained market share from unorganized and regional players. Revenue grew by 32% YoY, accompanied by strong EBITDA margins of 13.7%, an improvement of 424bps YoY.

* Going forward, the management plan is to focus on strengthening its product portfolio, expanding its distribution network in non-south regions and increase presence across e-commerce and modern trade. Besides V-guard has strong balance sheet and decent cash flow which will help in inorganic expansion.

Technical Outlook

* VGUARD has had a history of exceptional performance as it rose from a single-digit mark to 250 during the uptrend which lasted for nearly nine years (2009-2018).

* It retested the record high in 2019, after a marginal dip but it couldn’t sustain around that zone and again inched lower. It penetrated the major support zone of the previous swing low around 160 levels for a brief but didn’t see any major fall.

* It has been gradually inching higher for the last four months and reached closer to its record high. Indications are in the favor of breakout from the three-year long consolidation phase. We thus advise accumulating within 240-250 levels with the close below stop loss of 215 for the target of 310.

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