Consumer electronics firm V-Guard is aiming for a top-line growth of 15 percent CAGR in 4-5 years, Sudarshan Kulkarni, CFO of the company, told Moneycontrol on July 25.
V-Guard, which manufactures air coolers, water heaters, solar panels, and voltage stabilisers, expects product costs to rise by 2-3 percent over the next few months on commodity price pressures.
The Kerala-headquartered firm reported a 54.1 percent year-on-year (YoY) increase in net profit to Rs 98.97 crore and a 21.6 percent rise in revenue to Rs 1,477.10 crore for Q1FY25.
Earnings before interest, tax, depreciation and amortization (EBITDA) for the quarter were at Rs 155.77 crore, growing by 48.7 percent YoY, compared to Rs 104.75 crore in Q1FY24.
“Gross margin expanded by 380 bps YoY, at 36.3 percent in Q1 FY25 due to a combination of pricing actions, cost-effectiveness initiatives, and product mix,” the company said in an investor presentation filed on the Bombay Stock Exchange (BSE).
Ad spending was 2.8 percent of revenues in Q1 FY25, compared to 2.2 percent in Q1FY24.
Planned capex, fan-manufacturing unit
For FY25, the capex is planned around Rs 100 crore, and the allocation strategy, as Kulkarni explained, is to set up a manufacturing unit to produce fans in 12-15 months at Hyderabad. Its kitchen appliances brand Sunflame’s manufacturing unit will see some routine maintenance.
“In other commodities, post-COVID, we went through some rapid and high inflation. Thereon, commodity prices have softened in the last few quarters. Recent trends (show) some firming up in other commodities also. It looks like we are heading for a 2-3 percent cost increase in the next couple of months,” he said.
The June quarter saw robust demand, aided by summer season products like voltage stabilisers and air coolers. As the non-seasonal products take over, the company is hoping for the momentum to continue, he said.
In Q1, electronics segment contributed 41 percent to the overall revenue YoY, consumer durables around 26 percent, and electricals around seven percent.
Sunflame degrew by seven percent YoY from Rs 63 crore in Q1FY24 to Rs 59 crore in the June quarter. V-Guard announced the acquisition of Sunflame in December 2022.
The CFO said that in the last 6-7 quarters, the kitchen industry has been facing a weak demand, after a strong growth during COVID-19. He expects demand to recover to its original growth trajectory.
The electricals segment saw muted growth because of wire destocking as copper prices softened in June after a spike in April-May.
“Copper prices are still 10 percent higher than what they were a year ago. However, the fluctuation in prices is not unusual, and the wire business is well adapted to this,” he believes.
Innovation pipeline
The innovation pipeline is strong in FY25, with new launches coming up in existing categories like stabilizers, fans, and inverters. The priorities for the next quarter are to continue with consumer durables as the growth engine. The company will also focus on emerging channels of trade, like e-commerce as well as modern trade, and formal trade channels, Kulkarni said.
The company’s strategy includes adding 3,000-4,000 new retailers annually, coupled with sales acceleration initiatives across various product categories.
The total number of dealer-retailer touch points, as of FY24, is 1 lakh, as per its annual report. “While it is too soon to talk about FY25, efforts are being taken in this direction,” the CFO said.
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