Buy V Guard Industries; target of Rs 420: Anand Rathi

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Electronics growth: Revenue grew 60% y/y, led by solar power systems, with strong contributions from inverters and batteries, driven by power outages and demand for residential systems.
  • Pricing actions: Around 3-4% of cost inflation remains to be passed on, with price hikes of 6-12% being implemented across categories, expected to support margin recovery.
  • Gross margins: The ~300bps shortfall in gross margin versus plan was attributable to an adverse product mix (~100bps) and delayed price pass-through (~200bps), with recovery expected in Q3 and Q4.
  • EBITDA margins: H1 EBITDA margin stood at ~9.6-10%, with the company on track to achieve double-digit EBITDA margins, driven by improved operating leverage and lower ad spending.

Thesis Validation Checklist

  • Demand momentum: Sustained growth in Electronics & Electricals, recovery in Consumer Durables, and low-base recovery in Sunflame.
  • Margin expansion: Improvement in gross margins, driven by pricing actions and product mix, and achievement of double-digit EBITDA margins.
  • Revenue growth: 13.9% revenue CAGR over FY26-29E, driven by Electronics, Electricals, and Consumer Durables.
  • Return on capital: 510bps expansion in RoCE to 22.1% by FY29e, driven by low capex intensity and healthy cash generation.