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Cooling products drive top line, margin

In-line Q4 revenue, up by 18% YoY, driven by overall growth

V-Guard Industries (VGRD IN) Q4 revenue rose 18% YoY to INR 13.4bn, largely in line with our estimates. This was fueled by robust overall growth across segments, primarily driven by strong demand for cooling products, such asfans, air coolers and AC stabilizers due to the harsh Summer. During the quarter, South India witnessed growth of 18.6% YoY, outgrowing nonSouth region at 15.8% YoY, for the first time recently. FY24 revenue increased 18% YoY at INR 48.6bn.

Consumer durables, Sunflame lead the way

Revenue from electronics grew 19% YoY to INR 3.2bn, driven by healthy volume growth in AC stabilizers. The consumer durables segment witnessed growth of 28% YoY to INR 3.7bn, driven by robust demand for fans and air coolers. Sunflame reported growth of 28% YoY to INR 730mn, led by revival in demand and strategic initiatives taken by management to bolster sales growth. The electricals segment grew 11% YoY to INR 5.8bn.

In-house manufacturing up to 65%; target of 75% in 18 months

In-house manufacturing rose to 65% in FY24 compared to 60% in FY23. Management targets to ramp-up to 75% in the next 18 months, with focus primarily on battery manufacturing and kitchen appliances. In Sunflame, the hoods manufacturing line, which was set up before the merger, currently has been optimized, resulting in a 7-10% cost advantage compared to importing or locally sourcing. Management further looks to utilize factories of VGRD and Sunflame for crosssourcing, resulting in further cost savings.

Valuation: revise to Accumulate with a higher TP of INR 425

We cut our EPS estimates by 3% in FY25 but raise them by 3% in FY26, driven by improved mix and surge in gross margin once in-house manufacturing rises. We raise our TP by 4% to INR 425 from INR 410 on 40x (unchanged) March 2026E earnings. We revise to Accumulate from Buy. Continued margin improvement driven by Sunflame optimization, rise in copper prices, cross-selling opportunities along with revival in real estate demand may rerate it further. We expect an earnings CAGR of 41% during FY24-26E, with an average ROE and ROCE of 17% & 16%, respectively, during FY24-26E.

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