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Nirmal Bang Report
V-Guard Industries Ltd. posted revenue of Rs 9.7 billion in Q3 FY23, up 1.7% YoY. The topline was below our/consensus estimates by 4%/1.2%. Topline growth was mostly non-South driven, with revenue from this region up 11.3% YoY at Rs 4.5 billion.
This was partially offset by South region's revenue, which declined by 4.5% YoY to Rs 5.3 billion, resulting in 46:54 sales mix. While the electricals/consumer durables segments revenue grew by of 1.9%/4.5% YoY to Rs 4.3 billion/Rs 3.5 billion, the electronics segment's revenue declined by 3.5% YoY to Rs 1.9 billion.
Gross margin contracted by 240 bps YoY to 28.2%. Ebitda declined by 29.1% YoY to Rs 598 million. Ebitda margin compressed by 270 bps YoY to 6.1%, below our/consensus estimate of 7.9%/8.4%. Consequently, profit after tax declined by 31.9% YoY to Rs 358 million and was below our/consensus estimate of Rs 491 million/Rs 536 million.
The management highlighted that the overall demand scenario remained weak due to high retail inflation and margins continued to be impacted by V-Guard's high-cost inventory, particularly in electronics and consumer durables segments.
Simon Electric Pvt. Ltd. acquisition was concluded on January 12, 2023. We believe that the acquisition of SEPL will help V-Guard establish its position in the kitchen appliance space by leveraging SEPL's wide product portfolio and product development capabilities.
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