HDFC Securities is bullish on V-Guard has recommended buy rating on the stock with a target price of Rs 214 in its research report dated September 27, 2017.
HDFC Securities' research report on V-Guard
We arranged a road-show with the management of V-Guard. Our confidence in the company’s long-term business trajectory was further strengthened, despite the short-term hiccups caused by GST. The company is confident of achieving 15% revenue growth in FY18, despite revenue being flat in 1QFY18. Healthy underlying growth with restocking should register high double-digit figures in the coming quarters. Management is also confident of maintaining 10% EBITDA margin in FY18 (1QFY18 margin was at 5.8%, -574bps YoY).
We expect V-Guard to deliver 15% revenue CAGR over FY17-20. Healthy revenue growth, higher fixed cost absorption in the Non-South regions, and better margins in new product launches should help expand the EBITDA margin by 200bps over FY17-20. We foresee EPS CAGR of 27% over FY17-20E. We value V-Guard based on a P/E of 32x Sep-19EPS, and arrive at a TP of Rs 214. We maintain BUY.
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