Sharekhan's research report on V-Guard Industries
Q1 numbers exceeded estimates, driven by broad-based sales growth and gross margin recovery. High-cost inventory of some products and increased advertising expenses impacted profitability of all segments. Management has maintained 14-15% revenue growth guidance for FY2024, which will be led by the festive season. GPM is expected to expand by 100-150 bps and OPM is likely to be 9-9.5% in FY2024, led by volumes, better product mix, softening of commodity cost, and depletion of high-cost inventory. Sunflame would have a revenue run rate of Rs. 300-350 crore in FY2024, as the company gradually unlocks synergy benefits in geography and product portfolio.
Outlook
We maintain Buy with a revised PT of Rs. 360, given the company’s widening presence in non-south markets, traction in new product categories, Sunflame’s acquisition, and volume-driven growth across verticals. We build in Revenue/PAT CAGR of 15%/~39% over FY2023-FY2025E. The stock trades at a P/E of ~35x its FY2025E EPS (including Sunflame).
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