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Strong revenue growth YoY: V-Guard posted revenue of Rs 1,165cr up by 18.8% YoY/2.8% QoQ largely driven by its electricals & electronics segments while consumer durables saw the pickup towards the end of the quarter. Geographically both non-South & South performed well as compared last year. Sequentially, South and Electronics growth remain impacted.

Healthy improvement in margin: V-Guard’s gross profit grew by 36.1% YoY/3.1% QoQ to Rs 394.8cr and margins came at 33.9%, an increase by 430bps YoY/11bps QoQ driven by raw material price decrease and change in product mix. EBITDA was up by 54.2% YoY/9.9% QoQ to Rs 101.6cr with increase in EBITDA margin by 200bps YoY/56bps QoQ to 8.7% led by better topline. PAT was up by 48.2% YoY but marginally was down by 1.2% QoQ to Rs 58.2cr with PAT margin at 5% higher by 99bps YoY but down by 20bps.

Non-South is gaining share: South region continues to dominate the revenue share at 54.4% and it reported the revenue of Rs 592.2cr, up by 10.9% YoY but a decline of 1.8% QoQ. Revenue share of South decreased from 56.2% in Q2FY24 to 54.4% in Q3FY24 while as compared last year it was the same. Non-South revenue grew by 11.2% YoY/5.9% QoQ to Rs 496.9cr with share increased to 45.6% as compared to 43.8% in Q2FY24 while share was same as compared last year. Further, growing in the non-South region remains the key focus area.

All segments witnessed decent growth as compared YoY: Electricals segment grew by 8.5% YoY/2.3% QoQ to Rs 472.7cr and Consumer Durables grew by 11.1% YoY/10.8% QoQ to Rs 392.8cr led by improving demand and product mix. However, Electronics saw mixed growth with healthy growth 16.9% YoY while down by 12.3% QoQ to Rs 223.6cr as stabilizer being the oldest product growth seems to be capped. Further, Electricals, Electronics & Consumer Durables segments contributed ~40.6%/19.2%/33.7% to revenue and 46.9%/31.4%/12.8% to profits in Q3FY24. In addition, Sunflame earned revenue of Rs 76.3cr, up by 23.6% QoQ and contribution from this

Key Highlights: 1) Consumer demand remained slow for the quarter while pickup was seen towards the end. And going ahead, demand is expected to continue its upward trend. 2) Advertisement spends stands at 2.7% similar as compared to last year. 3) Focus remains on the growth from non-South regions. 4) Plans to reduce debt taken for Sunflame in the next 4-6 quarters. 5) Despite competition, their plan is to grow Electricals, Consumer Durables and Sunflame segments. 6) Other expenses were higher as it includes one-off provisions of 4.5cr and write off of bad debt. 7) Manufacturing units Electronics Panchanagar is performing well while Battery plant at Hyderabad and kitchen plant at Vapi will commence production in Q4FY24 and aid to drive growth. 8) Amongst products, stabilizer will have stagnant growth due to its strong presence and limited scope of upside while other segments such wires, pumps, fans, kitchen appliances, etc. will see strong growth ahead

Outlook & Valuation: V-Guard posted decent set of numbers as compared last year while sequentially decline in raw material cost is a key positive. Further, demand is further set to pick-up pace and along with its management strategy would be to continue its focus on growing non-South region, focus on product mix, growing Sunflame segment. On the financial front, we have estimated its revenue/EBITDA to grow at a 16.3%/27.1% CAGR over FY23-26E and have upgraded our rating to Buy (from Accumulate earlier) and target price revised upwards to Rs 359

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