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Centrum Broking Report
We believe V-Guard Industries Ltd.'s decision to acquire 100% stake in Sunflame Enterprises Pvt. Ltd. is a synergistic fit at a reasonable valuation (1.9 times FY22 sales and 20 times FY22 profit after tax).
It provides credible prospects to V-Guard of becoming a meaningful player in the domestic kitchen appliances segment, especially the cooking range.
The key benefits for V-Guard are-
access to Sunflame's flagship brands ‘Sunflame' and ‘Superflame' which have a good brand recall and wider product basket,
synergies in the form of geography, product portfolio and sales network,
complimentary addition of cooking portfolio as pressure cooker and gas stoves are Rs 30 billion market each, while entire Kitchen appliances market size is ~Rs 180 billion, where V-Guard has negligible presence and
Sunflame's sound financial profile with gross/Ebitda/profit after tax margin of 35-38%/10-13%/9-12% over FY16-21.
Our estimates indicate that this deal will be earnings per share accretive for V-Guard by 5% each for FY24E/FY25E.
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