Mid-cap Electrical Stock Declares 130% Dividend, Can Rally Up To 22%, Says ICICI Direct

V-Guard Industries Ltd announced a 130% dividend through securities exchange filing on May 30, 2023, when the company posted its quarterly results. The company reported growth in the fourth quarter of the financial year 2023.

V-Guard Industries is a mid-cap company that is part of fast moving consumer electrical (FMEG) goods space. The company has a wide portfolio of products ranging from switchgear, water heaters, stabilizers, and fans. The company also manufactures home appliances manufacturer and has headquarters in Kochi.

Based on its recent performance and updates from the company, a prominent stock broking firm, ICICI Direct has valued V-Guard's stock. It believes that the mid-cap stock price will rally by approximately 22%.

Q4FY23 Performance

V-Guard Industries reported revenue growth of ~7.6% YoY to Rs 1,140 crore on a higher base. Revenue growth was driven by ~16% growth in the consumer durables segment led by the consolidation of Sunflame. Gross margin improved ~212 bps YoY supported by softening of raw material costs and normalisation of high-cost inventory in the consumer durables segment.

However, the EBITDA margin declined 192 bps YoY to 8.7% due to weak operating leverage and increased advertisment spending. The profit after tax declined by ~ 42% YoY to Rs| 53 crore due to lower EBITDA margin and higher interest outgo (up ~6x YoY) on account of debt raised for the acquisition of Sunflame.

Outlook

The broking firm has mentioned the key triggers that would drive the key price performance. Increased government capex, urbanization, ~1 crore new houses under PMAY, and rising aspiration are key growth drivers for V-Guard's consumer durables segment.

There will be strong growth in the consumer durables segment post-consolidation of Sunflame. As the company plans to enhance the presence of Sunflame in the south region and on e-commerce platforms.

The brokerage house pointed out that the electrical company plans to focus on increasing the mix towards in-house manufacturing and the launch of high-margin products will lead to EBITDA margin expansion over FY23-25E.

Valuation & Rating

V-Guard's share price has given a return of ~22% in the past five years (from Rs208 in January 2018 to Rs 253 levels in June 2023), ICICI Direct has said.

Further, it added, "We maintain our BUY rating on the stock. We value V-Guard at Rs 310 i.e. 35x P/E on FY25E EPS".

Dividend Details of V-Guard Industries

According to the exchange filing of V-Guard Industries the Board of Directors has a Final Dividend of Rs 1.30 (130%) per equity share of face value Re 1 each for the financial year 2022-23. The dividend if approved by the members at the Annual General Meeting (AGM), shall be disbursed within 30 days from the date of the AGM, which is scheduled to be held on Thursday, August 24, 2023.

The Company's Register of Members and Share Transfer Books shall remain closed from August 18, 2023, to August 24, 2023 (both days inclusive) for payment of dividends to the shareholders and dividends will be paid to those shareholders whose name(s) appear in the Register of Members / Register of Beneficial Owners on August 17, 2023.

Share Price Movement

The latest market price of V-Guard Industries stock closed at Rs 252.20, it ended marginally down by 0.06% on an intraday basis. This mid-cap stock surged by 7.87% and 39.85% in the last one year and in three years respectively.

Disclaimer

The stock has been picked up from the brokerage report of ICICI Direct. Greynium Information Technologies, the author, or the brokerage firm will not be liable for any losses caused as a result of decisions based on the write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.