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Mixed performance; Maintain Accumulate

Mixed topline: V-Guard reported mixed performance on topline as revenue grew by 15% YoY to Rs 1,133.8cr while it declined by 6.7% sequentially. Excluding Sunflame, revenue grew by 8.7% YoY but de-grew by 6.9% QoQ. Both geographies as well as segment witnessed decent growth as compared last year while sequentially performance was mixed.

Geographies performed well YoY: The company’s South (56% of revenue) and non-South (43.8% of revenue) regions performed well as compared last year. South grew by 7.3%/1.5% YoY/QoQ to Rs 602.8cr while Non-South sales grew by 10.5% YoY to Rs 469.3cr while sequentially growth dips by 15.9%. Further, the company remains focused on its expansion in non-south regions.

Electricals, the highest contributing segment to revenue & profits led the growth: Amongst segments Electricals (40-41% of revenue) grew by 9.7%/1.2% YoY/QoQ to Rs 462.3cr followed by Consumer Durables (~31.3% of revenue) segment at Rs 354.7cr, up by 5.1%/7.1% YoY/QoQ. Besides, its Electronic (22-23% of revenue) segment grew mixed with growth of 12.1% YoY and de-growth of 29.9% QoQ to Rs 255.1cr. On profit front, Electricals (48.6% of profits) grew by 67.8%/32.1% YoY/QoQ to Rs 38.3cr & Electronics (47.9% of profits) grew by 58.5% YoY to Rs 37.8cr while it de-grew by 35.4% QoQ. On the contrary, Consumer Durables saw de-growth while Sunflame contributed minimal to profits.

Margins improved as compared Q2FY23: V-Guard’s profit & margin performance remained mixed in Q2FY24, wherein it saw steady improvement as compared to last year while muted performance was seen as compared sequentially. Further, its Gross profit/EBITDA/PAT increased by 32.7%/27.2%/35% while margins improved by 452bps/78bps/77bps YoY.

Outlook & Valuation: V-Guard posted mixed numbers and growth was led by the South region and Electricals segment. At present, demand remained muted however with improvement going ahead, management expects 2HFY24 to be better led by festive season. Additionally, their strategy would be to grow in non-South markets, expand distribution reach and focus on premium products which would aid margin growth as well. On the financial front, we have estimated its revenue/EBITDA to grow at a 16%/36.4% CAGR over FY23-25E and have maintained our rating of Accumulate with a target price of Rs 340

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