V-Guard Industries extends rally on stellar Q4 performance

At 02:07 PM, the stock was up 7% to Rs 1,268, extending its previous day's 20% surge on the BSE.

V-Guard Industries was trading higher by 7% to Rs 1,268, extending its previous day’s 20% surge on the BSE, after the company reported better-than-expected earnings for the quarter ended March 31, 2016 (Q4FY16).

The stock hit a record high of Rs 1,300 on the BSE in intra-day and has seen a combined 983,942 shares changing hands on the counter on the BSE and NSE till 02:07 pm. The S&P BSE Sensex was down 0.11% at 25,235 points.

In Q4FY2016, V-Guard Industries more than doubled year on year (YoY) its net profit to Rs 42 crore driven by healthy revenue growth and strong margin expansion.

Total income from operations for the quarter grew 16% at Rs 513 crore against Rs 442 crore in the corresponding quarter of last fiscal. Earnings before interest, tax, depreciation and amortization (EBITDA) margin improved by 400 basis points at 12% in Q4FY16 against 8% in year ago quarter.

The revenue growth for the quarter is attributed to a strong traction in some of the products like fans, pumps and water heaters.

The management sounded positive on the overall growth prospects and revised its margin guidance. They also see further scope for improvement in working capital cash conversion cycle and expect to sustain the return on capital employed (RoCE) of around 25% in the long run.

Sharekhan retained ‘buy’ rating on the stock with a revised price target on the stock to Rs 1,350.

“With deleveraged balance sheet, the company is looking out for inorganic growth opportunities to widen its network and product range. On this back drop, we have revised upward our earnings estimates for FY2017 and FY2018 by roughly 17% each, with better margin assumptions,” the brokerage house said in a note.