V-Guard Q2 Results Review - Green Shoots Visible; Model Recovery In FY25: ICICI Securities

ICICI Securities Report

Takeaways from V-Guard Industries Ltd.'s Q2 FY24:

1. gross margin is reverting to pre-Covid levels (+ 449 basis points YoY in Q2 FY24),

2. Business to business segments have maintained healthy growth whereas business to consumer segments (consumer durables) continued to report dismal performance, and

3. there is improvement in working capital.

We expect a recovery in FY25 due to likely revival in consumer demand, stability in input prices and exhaustion of high cost inventory. We expect profitability in consumer durables to revive in H1 FY25.

The distribution, sourcing and media buying synergy benefits post Sunflame Enterprises Pvt. Ltd. acquisition are likely to be realised in H2 FY24 and FY25.

We remain constructive on V-Guard and maintain 'Add' rating with discounted cash flow based unchanged target price of Rs 335 (implied price/earning of 46 times FY25E).

Risks

• Sharp increase in input prices and competitive pressures

major increase in input prices and/or increase in competitive pressures will likely result in downside to our estimates.

• Delays in launch of new plants/products

Any delays in launch of new products and/or plants may result in lower earnings than estimated.

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