ICICI Direct has given Buy recommendation for V-Guard Industries recommended buy rating on the stock with a target price of Rs 265 in its research repo with a target price of Rs. 265 in its research report issued on Feb 19, 2021

ICICI Direct research report on V-Guard Industries

V-Guard’s performance in Q3FY21 was much ahead of our estimates mainly due to smart sales recovery followed by strong festive demand and market share gains from unorganised/regional players. The company also saw channel re-filling of key products ahead of peak season. According to the management, V-Guard will continue to focus on expanding its distribution network in non-south regions (~41% of revenue). Revenue of non-south regions posted phenomenal growth of 43% YoY, better than ~25% YoY revenue growth from south regions. Other than this, the company will also launch new products (initially under the stabilisers and digital UPS category) by leveraging technology benefit from its recent investment in battery startup ‘Gegadyne Energy’. As on 9MFY21, its balance sheet remained strong with net cash position at Rs 482 crore supported by robust cash flow from operation (CFO) of Rs 369 crore during the same period. We believe the strong CFO was mainly due to improvement in working capital cycle (48 days in December 2020 vs. 53 days in December 2019). The company is also looking at inorganic opportunities into adjacent product categories where RoCE of business is not less than 20%. However, in case of non-materialisation of deal cash would be utilised as payout to shareholders.


We tweak our revenue, earning estimates upward for FY23 by ~12%, ~14%, respectively, given a strong construction push by the government and market share gain will benefit organised players like V-Guard. We reiterate our BUY rating and revise our target price to Rs 260 (earlier Rs 210), valuing the company at 37x FY23E earnings.