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Last Updated : Oct 28, 2016 01:29 PM IST | Source: Moneycontrol.com

Hold V-Guard Industries; target of Rs 186: ICICI Direct

ICICI Direct recommended hold rating on V-Guard Industries with a target price of Rs 186 in its research report dated October 24, 2016.

 
 
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ICICI Direct's research report on V-Guard Industries


We believe the next level of topline growth for the company would come from expansion in non-south markets. V-Guard is not only diversifying its product portfolio but also enhancing its dealer network across India. Leveraging its brand V-Guard, the company has 624 distributors and 5562 channel partners serving 25,000 retailers across India. V-Guard works on an asset light model and outsources more than 60% of its production. It has turned into a net cash company with improvement in working capital cycle. This would help in maintaining higher RoCEs, RoEs of 35%, 25% (average) in FY17E, FY18E, respectively.


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 29% for FY16-18E. However, the recent rally in the stock discounts the near term positive of improved working capital days and positive free cash flows. Hence, we maintain our HOLD rating on the stock with revised target price of Rs 186 (value the stock at 30x FY18E).

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First Published on Oct 28, 2016 01:29 pm
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