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- 31 May 2023
- ICICI Securities
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V-GUARD REPORTS MIXED BAG PERFORMANCE IN Q4FY23
VGUARD - 377 Change: 7.15 (1.93 %)News: Net sales of the company increased by 7.7% YoY in Q4FY23 to ~Rs 1140 crore on a higher base. Segment wise ‘Electronics’ (Stabilisers/Digital UPS) segment revenues increased by ~10% YoY to ~Rs 272 crore, 'Consumer Durable’ (Fans/switchgear/kitchen appliances/water heaters) segment including Sunflame revenue increased by ~16% YoY to Rs 343 crore. Sunflame revenue came in at ~Rs 57 crore. 'Electricals' segment (wires/pumps) revenues grew by ~2% YoY to ~Rs 525 crore. Gross margin improved by 212 bps YoY to 31% supported by softening of raw material prices. However, EBITDA margin declined by 192 bps YoY (up 194 bps QoQ) to 8.7% due to weak operating leverage and higher advertisement expenses. PAT declined by ~42% YoY to ~Rs 52.7 crore as a result of lower EBITDA margin and higher interest outgo (up ~6x YoY). The company declared a total dividend of Rs 1.3/share for FY23. (Payout ratio of ~29.5%)/
Views: We believe V-Guard's topline growth was majorly driven by its consumer durables segment on account of consolidation of Sunflame. However, revenue growth from Electronics and Electricals segment continued to remain under pressure amid subdued demand. In FY23, revenue from non-South region grew by ~26% YoY to ~Rs 1841 crore thereby contributing 45.3% to the overall revenue vs 41.6% contribution in FY22. Although, EBITDA margin declined on a YoY basis, we believe EBITDA margin at 8.7% has shown improvement in Q4 after remaining under pressure for last three quarters supported by improvement in gross margin. However, on the profitability front, PAT decline is majorly due to higher interest costs on account of debt raised for acquisition of Sunflame. We await management commentary on demand outlook and sustainable EBITDA margin guidance, going forward.
Impact: Neutral