ICICI Securities has reiterated a BUY call on V-Guard Industries, raising its 12-month target price to Rs 440 from Rs 410, reflecting a 17% upside from the current market price of Rs 377. The decision is underpinned by solid growth across the core segments—electronics, electricals, and consumer durables—although Sunflame continues to lag. With favorable macros like steady commodity prices and increased manufacturing capacity, V-Guard is poised to expand its margins gradually, supported by strategic investments and superior product mix.

Quarterly Review: A Well-Balanced Growth Story

V-Guard posted a robust Q4FY25 performance:

Revenue grew 14.5% YoY to Rs 15,381 million, driven by strength in stabilisers, wires, fans, and air coolers.

EBITDA rose 11.9% YoY to Rs 1,431 million, though margins dipped slightly by 22 basis points to 9.3% due to higher employee and overhead costs.

Net profit jumped 19.6% YoY, reaching Rs 911 million, with solid contributions from core product lines despite Sunflame underperformance.

The margin dip stemmed from elevated employee costs linked to expanded manufacturing operations and Sunflame’s ongoing integration.

Segment-Wise Analysis: Core Business Shines, Sunflame Falters

While Sunflame’s revenues dropped sharply due to a slowdown in institutional (CSD/CPC) channels, the electronics division (primarily stabilisers) soared on the back of strong RAC demand. Electricals and durables benefitted from a healthy summer season and normalized inventory levels.

Geographic Expansion: Balanced Growth Across Regions

V-Guard maintained steady growth momentum in both southern and non-southern markets:

This geographic diversification is crucial for sustaining long-term growth as V-Guard strengthens its footprint in newer territories through distribution expansion.

Margin Outlook: Operating Leverage to Support Expansion

ICICI expects EBITDA margins to expand from 9.2% in FY25 to 10.1% by FY27, supported by:

Increased contribution from in-house manufacturing, aiding gross margins.

Favorable commodity trends stabilizing input costs.

Improved revenue mix, skewing towards higher-margin categories.

The electronics segment has already posted a 655bps YoY EBIT margin expansion, showcasing operating leverage benefits.

Sunflame: Strategic Patience Despite Underperformance

Despite continued drag, V-Guard plans to keep Sunflame in investment mode through H1FY26, focusing on general trade while avoiding e-commerce-driven price wars. Though the acquisition has not yet delivered economic value added (EVA), management is optimistic about revival once distribution stabilizes.

Key limitations remain:

High exposure to muted CSD/CPC channels.

Addressable market remains constrained without digital sales.

Forward Guidance and Financial Outlook

ICICI projects 16.5% revenue CAGR and 27.2% PAT CAGR from FY25 to FY27. Strong visibility in core product demand and stable cost dynamics back the optimism.

The stock currently trades at 32.3x FY27E EPS, which ICICI finds reasonable given the improving fundamentals and growth trajectory.

DCF-Based Valuation: Target Price Revised to Rs 440

The revised target is based on Discounted Cash Flow (DCF) methodology:

This implies a P/E multiple of 38x FY27E EPS, signaling confidence in structural growth and improved capital efficiency.

Risks to Monitor

Investors should remain cautious of:

Unexpected input cost inflation that could compress margins.

Competitive intensity in core categories, especially from regional players.

Execution delays in product launches or capacity rollouts.

Slow Sunflame turnaround, which may drag consolidated earnings.

Final Verdict: Attractive Risk-Reward at Current Levels

V-Guard continues to exhibit commendable execution across its core segments, supported by margin-enhancing levers and broad-based geographic growth. Although Sunflame remains a near-term overhang, the company’s prudent capital deployment and operating discipline position it well for FY26–27.