Festival season sales, pent-up demand to light up V-Guard stock
Shares of V-Guard Industries Ltd saw a smart rebound, surging more than 11% from lows reached in mid-August. The resumption of economic activity and the expectation of increased sales of consumer devices and durable goods during festival season improved sentiment for the title.
The company was hit hard, more than its peers, during the lockdown, as it derives a significant portion of its sales from southern and eastern India, which were hit hardest in Wave 2 pandemic, analysts at HDFC Securities Ltd. said. .
Sales of electronics segment such as stabilizers and air coolers had a huge impact as the usual high season demand was absent. Coupled with lower operating leverage, EBITDA margin declined 521 basis points sequentially. One basis point is one hundredth of a percentage point, while EBITDA is earnings before depreciation and tax depreciation.
However, the outlook is good and sales should pick up in the coming quarters. HDFC Securities analysts said the recovery in demand and normal trading stocks may help it recover faster. Emkay Global analysts pointed out that the revenue momentum in July was strong and the company plans to proceed with a 1.5-2% price hike, in addition to the 6-7% hike already made, to offset the impact of commodity inflation.
Investors will therefore be watching sales dynamics in the future. The only concern is that business reopening is still slow in southern India compared to other regions, analysts said. Positively, industrial and project activities continued this year and should be positive for B2B demand.
Never miss a story! Stay connected and informed with Mint. Download our app now !!