Hold V-Guard Industries; target Rs 596: Nirmal Bang
Brokerage house Nirmal Bang has recommended hold rating on V-Guard Industries with a revised price target of Rs 596 in its July 19, 2013 research report.
Nirmal Bang's report on V-Guard Industries
"In Q1FY14, V Guard Industries registered strong, 28 percent YoY revenue growth to Rs. 408.2 crore and 7.8 percent QoQ. This was primarily driven by strong revenue growth of 31.1 percent YoY in the electronic segment (stabilizers, UPS and inverters) and 24.8 percent YoY in the electrical segment (cables & wires, water heaters etc). The Stabilizer (16.5 percent YoY) and Digital UPS (68.6 percent YoY) segments witnessed strong growth this quarter owing to increased demand for consumer durables in the summer season and frequent power outages. The company has also been able to take price hike to the tune of 3 percent during the quarter in across product segments. In Q1FY14, South market grew by 23 percent and non South market by 41 percent YoY. Non-South expansion continues at a healthy pace, now accounting for 30.7 percent of total revenues as compared to 27.8 percent a year ago."
"At CMP of Rs. 529, the stock is trading at a PE of 17.1x in FY14E and 12.4x in FY15E. With the advertisement expenses declining substantially during Q2FY14 and Q3FY14, also, the price hikes made across product categories 3 percent by the company in Q1FY14 will improve profit margins going forward. Operating leverage following higher sales volumes in other product categories, as the company expands into new markets, plus entry into new product segments like induction cook-top, may also ensure good profit growth. We are upbeat on the stock on the account of core business momentum remains robust with healthy EPS growth, cash flow generation and high RoEs. We have revised our target price of Rs. 596 per share at PE 14x FY15E (Rs. 535 per share). We recommend a "HOLD" rating and BUY on decline," says Nirmal Bang research report.
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