Buy V-Guard Ind; target of Rs 240: Mehta Equities

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Buy V-Guard Ind; target of Rs 240: Mehta Equities

Mehta Equities is bullish on V-Guard Ind and has recommended buy rating on the stock with a target of Rs 240 in its May 11, 2011 research report.

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Mehta Equities is bullish on V-Guard Ind and has recommended buy rating on the stock with a target of Rs 240 in its May 11, 2011 research report.

"V-Guard registered a healthy growth in its topline for the quarter ended Mar-11 with a growth of 56% (yoy) to Rs 222.7 Cr mainly on the back of robust volume & value growth across all the segments. Stabilizer segment volume grew by 30% and value grew by 36%, Wire segment volume growth was 35% while value growth was around 17% and Pump segment outperformed all the segments wherein Volume grew by 40% and value grew by 42% overall. The above value growth is been seen mainly on the back of price increase in across the segment by around 2%-4%. EBIDTA for the quarter stood at Rs 19.45 Cr Vs Rs. 13.35 Cr on YoY basis a growth of 46% while overall margins were under pressure mainly on the back of higher Cost of Services & Raw Materials. Selling & Distribution Exp were in line as expected. PAT witness a robust jump from Rs 6.08 Cr to Rs 14.24 Cr a growth of 134%. Margins stood at 6.39% vs 4.27% on YoY basis."

"For FY11 Electrical-Electro Mechanical grew 70% YoY. This segment contributes around 66% to the total revenue. Electronics segment grew by 45% from 148 Cr to 215 Cr (2011) which contributed around 30% to its topline. Rest of the value was from the others segments which is around 4% to it topline. Net sales reported a growth of 60% to Rs 726 Cr. PAT stood at Rs 42.63 cr vs 25.47 Cr resulting to margins around 5.87% Vs 5.61% YoY. We expect VGuard to perform well inline with our estimations with a growth seen around 30%-35% on YoY basis which, we feel it is reasonably possible looking at the robust demand on segment products. Non south region contributed Rs 162 Cr for the year 2011 and expect it to make it double in coming financial year 2012E. On the earnings we expect VGuard to report Rs 18.8 for FY2012E earnings Vs Rs 14.3 for FY2011."

"V-Guard has been outperforming our expectations on overall business growth while little bit of margins pressure persist on the back of aggressive selling and aggressive advertising attempts in non south markets. There was better than expected volume growth in Pump / wire segments and we continue to be positive on the overall business outlook on the voltage stabilizers, cables & pump segment. On overall valuations at the CMP Rs 188, the stock trades at 10x on its FY 12E earnings with EPS of Rs 18.8. Going forward; we believe things will improve gradually in next 3-6 months after running on full capacity. Hence we are positive on the stock and recommend investors to BUY/HOLD the counter with a target at Rs 240 for medium term investment," says Mehta Equities research report.

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