Q3FY24 Review: V-Guard Industries: Subdued demand impacts growth

5 Feb 2024 , 03:52 PM

Analysts at IIFL Capital Services have cut their FY24/25 standalone EPS estimates by 14/4% while that of Sunflame by 39/22% given volume challenges amidst weakness in consumer demand. Cost initiatives, greater in-sourcing and strategic interventions on product mix however aided growth in pumps, fans & kitchen appliances. Pick-up in demand for seasonal summer products now anchor hopes of rebound in mid-teen revenue growth and driving double digit margins. 

After decline in FY24, management is targeting double digit growth with operating margin expansion and is looking to repay M&A debt by FY26. The company targets to reclaim pre-acquisition operating margin of 14% (Q3:10.5%) and drive higher sales through focus on ecommerce (25-30% of mix) with right products, supply chain, investment in brand & exclusive stores and expansion in South market.

While profits in core business can nearly double in 2 years, Sunflame acquisition provides opportunity to leverage under penetrated large kitchen appliances market. Analysts at IIFL Capital Services have maintained their Add rating on the stock with a target price of ₹341, implying 10% returns from current levels.