V-Guard fundamental analysis

• Fundamental analysis

• Market Cap:  6,953 Cr.
  
• Current Price:  162.35
• 52 weeks High / Low  259.70 / 149.00
• Book Value:  23.20
• Stock P/E: 51.00
• Dividend Yield: 0.55 %
• ROCE: 26.12 %
• ROE: 19.62 %
• Sales Growth (3Yrs): 5.97 %
• Listed on BSE and NSE
• Company Website
• Face Value:  1.00

• PEG Ratio: 2.39
• Promoter holding: 62.73 %
• Pledged percentage: 0.00 %
• Debt:  10.00 Cr.
• Price to Earning: 50.97
• EPS:  3.18
• Net profit:  136.33 Cr.
• Profit growth: -25.73 %
• Profit growth 7Years: 16.72 %
• Net profit preceding 12months: 185.16 Cr.
• Profit growth 3Years: 8.61 %
• Dividend yield: 0.55 %
• Debt to equity: 0.01
• Sales last year:  2,482 Cr.
• Sales growth: -16.82 %
• Unpledged promoter holding: 62.73 %
• Investments:  44.85 Cr.
• 
  
  

V-Guard started as a small manufacturing unit in 1977. Over the years, It has expanded its product portfolio to digital UPS, Inverter and Inverter batteries, Electric Water Heaters, Solar Water Heaters, Domestic and agricultural Pumps, Industrial Motors, Domestic Switch Gears, Wiring and Industrial cables, Induction Cooktops, Mixer Grinders, Fans, Rice cooler gas, Gas Stoves and Solar power systems. Mr. Mithun K Chittilappilly is managing Director since 2012. Promoters hold around 62% whereas Axis MF is the largest non-promoter shareholder with 4% shareholding. M.cap is Rs 7,032 cr.

Investment rationale

 

Resilient business model to aid in critical times: V-Guard has a resilient business model with a diversified product portfolio and well-entrenched distribution reach that is driven by an experienced management team with strong understanding of business complexities. FY20 was a slow year for growth, based on weak consumer demand, tight liquidity conditions, reduced discretionary spending and the end-of-year lockdown. FY21 has also opened with the continuing conditions of extended inactivity and distribution closure. Near term visibility remains uncertain from a wider perspective. However, once normalcy returns, the Company is confident of reverting to top-line growth of 15% driven by increased scale in non-South markets and introduction of new/innovative products and entry into additional product categories.
 

Leveraging “V-guard” brand – Company leverages its strong equity brand - V-guard, in electrical and electronics space, with presence of over four decades. The company is market leader in Voltage Stabilizers segment with market share of >50% and strong presence in water heater and wiring cables.
 

Expanding footprints across India – V-Guard has been a dominant player in South India; however, over the last 7 years company has been expanding footprints across India which has been demonstrated through increased revenue contribution from non-South geographies from 30% in FY14 to 40% in FY19. Besides, Aggressive ad spends and sales promotions have created a strong equity and brand recall resulting in expanded footprints across India.
 

Wide distribution network - V-Guard has a diversified client base and an extensive marketing & distribution network. Its client base differs from product to product and includes direct marketing agents, distributors and retailers. The Company has a strong network of 31 branches over 40,000 channel partners across the country.
 

Valuation & Outlook – V-guard India has transformed itself into a Pan-India player. We believe its diversified product portfolio coupled with increased focus on penetrating in Non-South segment will drive the growth for company. The recent quarter performance is below par on account of nation-wide lockdown but management is confident about medium to long term opportunities as company has a strong balance sheet with minimal debt, high credit ratings and availability of substantial working capital lines providing financial stability. The stock is currently trading at P/E of 38.8x on its 1-yr fwd earnings.

 

Duration of recommendation: Short to Medium term.