Osar capital- V Guard Industries- Osarcapital

V-Guard Industries Ltd is a major electrical appliances manufacturer in India. It manufactures Voltage Stabilizers, Electric Pumps, Electric Motors, Solar Water Heaters, Electric Fans and UPSs. It was founded in 1977 by Kochouseph Chittilappilly as a small voltage stabilizer manufacturing unit.

Products line of V-Guard Industries

1. Voltage Stabilizers

2. Inverter, DUPS, Solar Power system & Inverter batteries

3. Water Heaters

4. Fans

5. Mixer Grinders

6. Induction Cooktops

7. Pumps

8. Wires & cables

9. Domestic Switch Gears

Company Analysis

Dominant play in stabiliser with focus on top three products

V-Guard is a well-established brand in stabilisers, PVC insulated cable, LT cables and pumps in South India. Sales from these segments have grown at 32% CAGR in FY09-14. These three segments contribute 62% of sales. The stabilisers business is one of the largest for V-Guard with top line contribution of 18% in FY14 with overall value market share of 19%. The company has witnessed revenue CAGR of 19% during FY08-14 led by volume CAGR of 12%. Voltage stabilisers are considered to be a necessity in most parts of India to protect consumer appliances as many regions in India face problems of poor quality power supply and voltage fluctuation. We have modelled overall revenue CAGR of 18% for FY14-17E, on the back of sustained demand for stabilisers from Tier-III, tier IV cities and smaller towns.

Strong distribution network to drive growth

V-Guard has strong distribution network of 400 distributors, 4200 direct dealers (1700

south, 2500 non south) and 25,000 retailers (50% south, 50% non-south).

Non south markets revenue is largely driven by strong brand value.

Unified pricing is already being followed in the Wires segment and the idea is to replicate

the same in other product categories.

People are looking for more comfort which will also the growth factor for the company.

Segment wise revenue is increasing by more than 15% which is a sign of growth of

this company.

Company has reported revenue in Electronics segment as 1934 mn in 1QFY15 as

compared to 1651 mn in same QFY14.

Revenue in Electric Segment is also grown by 16.8% from 2352 mn in Q1FY14 to

2747 mn in the same QFY15.

Stabilizers, Electric Water heater, Fan & Solar Power Heater shown a good Revenue

growth as compare to previous year.

The total Revenue increased by 17.1% from 4080 mn in 1QFY14 to 4777 mn same

quarter of FY15.

Yearly Revenue in South increased from 2745 mn in FY08 to 10815 mn in FY14.

In non-South Revenue is increase from 147 mn in FY08 to 10815 mn in FY14.

Companys Sales is increasing year on year in non-south geographical areas which will a huge

growth driver for the company in coming years.

EBITDA margin is growing with the sales growth in a healthy way, which is a good sign for

the company and its investors.

Net Sales is expected to be 21564.57mn in FY16 as compared to 15175.63mn in FY14.

EBITDA is expected to be 1890.96mn in FY16 as compared to 1273.85mn in FY14.

EPS is expected to be 35.30mn in FY16 as compared to 23.50mn in FY14.

We expect that the companys net sales will be 21364.57mn in FY16 as compared to

15175.68mn in FY14.

The PAT will also increase to 1053.91mn in FY16 as 701.34mn in FY14.

Company is continuously reducing its debt which shows that there is enough inflow of cash and we

expect that the debt equity ratio will be .28 5 in FY16.

We believe that V-Guard is focussed to improve market share in Non-South market which is giving a strong indicators for the companys earnings. There is also a shift from unorganized to organized market which will drive the growth moving forward. As the V-Guard stabilized itself as a Brand which will also increase its revenue.

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