Sharekhan is bullish on V-Guard Industries has recommended buy rating on the stock with a target price of Rs 215 in its research report dated September 14, 2017.
Sharekhan's research report on V-Guard Industries
Management of V-Guard stated that restocking of trade channels is at a faster pace in southern market rather than in northern market. However, management expects restocking to continue in Q3 due to onset of the festive season. Management sees restocking across all product categories of the company.
OutlookPost interaction with the management, we have marginally tweaked our earnings estimate for FY2018 and FY2019 to factor the price hike undertaken by the company to combat commodity inflation. Moreover, management has reiterated its sales growth of 15% and EBITDA margin of 10% for FY2018 despite disruption of GST in Q1FY2018. Management expects uptick in sales growth in H2FY2018. The working capital cycle, which got elongated in Q1 due to increased inventory days (channel de-stocking) is expected to stabilise in future. We continue to assign premium valuation to V-Guard on account of de-leveraged balance sheet, better margin profile, high return ratios and prudent working capital management. We reiterate Buy on the stock with a revised price target (PT) of Rs.215.
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