V-Guard’s management reiterated its FY15 revenue growth guidance of 20% despite the 12% YoY growth recorded in 3QFY15, implying 22% YoY growth in 4QFY15. This guidance was led by: (1) likely improvement in construction demand (due to the recent rate cut), (2) a likely early onset of summer (which will benefit stabilisers and pumps), and (3) bottoming out of copper prices (which will allow distributors to re-stock inventory). The FY15 EBITDA margin guidance was scaled down to 8% from 8.5-9% due to the dismal 5.5% margin recorded in 3QFY15. This implies higher EBITDA margin of 9.3% in 4QFY15, led by a favourable product mix, sequentially lower ad spend (given the launch of the Pebble series in 3Q) and lower inventory loss (assuming copper prices stabilise).
At CMP, V-Guard is trading at 19.2x FY17E P/E, a 20% discount to Havells standalone despite its higher FY14-17E EPS CAGR of 33% vs Havells' 14%
