V-Guard Industries stock may give 25% return in one year

From a single small manufacturing unit of voltage stabilisers, V-Guard Industries Ltd has grown rapidly to become a name synonymous with voltage stabilisers across the country. The company has extended its range of product portfolio from Voltage Stabilisers to Digital UPS, Inverter and Inverter Batteries, Electric Water Heaters, Solar Water Heaters, Domestic Pumps, Agricultural Pumps, Industrial Motors, Domestic Switch Gears, Distribution Boards, Wiring and Industrial Cables, Induction Cooktops, Mixer Grinders, Fans, Rice Cooker, Gas Stoves & Solar Power Systems. V Guard operates under three segments which are electronics, electricals and consumer durables and owns 10 manufacturing facilities across six locations in Tamil Nadu, Sikkim, Himachal Pradesh and Uttarakhand. Over the last few years, the Indian consumer electrical/electronics sector has delivered strong and sustained growth driven by significant trends. The factors that stimulate demand are the rise in working age population, growing disposable incomes, increasing propensity towards consumption, widening network of electrification in rural areas, expanding urbanisation, emerging credit culture and the online availability of products. Also, factors such as increased financing options, low interest rates, low penetration of products, shift to premium products in metros, a growing aspirational middle class and expansion of distribution reach by companies in smaller towns and cities as well. The Government has also approved the National Electronics Policy a few years back aimed at achieving a turnover of $400 billion for the electronics design system and manufacturing sector by 2025. Other schemes announced are the Performance Linked Incentive scheme (PLI), Electronic Manufacturing Clusters, interest subvention and credit guarantee incentives for Indian manufacturers to build more capacities. V-Guard manufactures 50% of its products in-house and the balance is outsourced from outside vendors. It has an extensive distribution network across the country with over 40,000 retail touch points in the non south region. The revenue share from the non south markets has increased from 33% in 2015 to 42% in 2021. As the company has been continuously adding new products to its portfolio according to the needs of the consumer, the V-Guard management expects the market share to grow at a much faster pace in the coming years. The company’s revenue and margins have grown at a CAGR of around 18% over the last 10 years on the back of better marketing strategies and various cost optimisation measures. The company is practically debt free. The asset light model aids V-Guard in generating higher return on assets thereby saving in capital expenditure. The V-Guard Industries stock quoting at Rs 260 on the stock exchanges can be accumulated by portfolio investors for a one year investment horizon for a 25% price appreciation target. Investors should check with their financial advisors before making any financial decision and act as per their risk profile.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.