ICICIDirect is bullish on V-Guard Ind has recommended buy rating on the stock with a target price of Rs 1370 in its research report dated May 05, 2016.
ICICIDirect's research report on V-Guard Ind
V-Guard reported a strong performance in Q4FY16 with revenues and earnings growth of 16% and 109% YoY, respectively. This was on the back of strong growth in stabilisers (up 26% YoY) and fans (up 46% YoY) segments, which are directly linked to an early onset of summer this year. Additionally, water heater (largely solar water heater), pump segment also recorded strong growth of 20%, 28%, respectively, YoY in Q4FY16. South posted strong growth of 18% YoY while after a muted performance over a few quarters, non-south region recorded revenue growth of ~13% YoY during Q4FY16
V-Guard has got transformed from a regional to a pan India player with strong earning CAGR of 21% in FY11-16. With the better sales mix and EBITDA margin outlook of ~10%, we estimate earning CAGR of 31% for FY16-18E. Further, the company is expected to command higher multiple due to improved working capital days and positive free cash flows. This would finally result in higher return ratios. We value the stock at 26x FY18E earnings and upgrade our rating on the stock to BUY with a revised target price of | 1370/share.
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