Edelweiss recommended hold rating on V-Guard with a target price of Rs 175 in its research report dated October 26, 2017.
Edelweiss' research report on V-Guard
V-Guard (VGI) clocked robust Q2FY18 performance spearheaded by strong re-stocking, primarily in UPS, stabilisers & kitchen appliances, which boosted OPMs. Key highlights: a) strong festive re-stocking post a tepid Q1 led to 4/25% sales/EBITDA beat spurred by higher growth in high-margin electronics/durables segments; b) GST & weak end user demand adversely impacted cables/switchgears growth; and c) management is confident of 15% top line CAGR over FY17-19E led by addition of 15K retailers, non-South revenue contribution jumping to 50% and higher SKU range rather than new products. While we are optimistic on the company’s growth path and sustained profitability, we maintain ‘HOLD’ given rich valuations at 40x FY19E EPS even as we revise our TP to INR175 (INR163 earlier) building in higher earnings growth for FY19E led by better growth in kitchen appliances & potential for better OPMs.Outlook
We envisage growth prospects to be bolstered by new revenue streams (kitchen appliances) with falling share of low-growth conventional businesses. The company’s sharpened focus on beefing up dealer network (especially in non-South areas) instills confidence. At CMP the stock trades at 40x FY19E EPS. We maintain ‘HOLD/SP’.
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