Valuation and view: We expect V-Guard Industries to post 20.3% CAGR in revenue and 28.1% CAGR in PAT over FY14E-16E. We believe that growth has bottomed out after two quarters of lower single digit performance and is expected to accelerate, given the strong outlook of summer going forward and lower base effect. At CMP of INR442, the V-Guard Industries stock trades at 13.9x FY15E and 11.2x FY16E earnings respectively. We value V-Guard Industries at 14x FY16E EPS of INR39.3 and arrive at a target price of INR550. Maintain Buy
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V-Guard Industries: Sharekhan Research Report
At the current market price, V-Guard Industries‘ stock is trading at 8.9x FY2012 earnings estimate. In its brief listing span since February 2008, V-Guard Industries has traded at an average multiple of 8x its one-year forward earnings per share (EPS). However, we feel that V-Guard Industries is poised for a re-rating due to the strong earnings growth trajectory expected in the next four years. Moreover, V-Guard Industries‘ stock is currently trading at a 30-40% discount to the valuations enjoyed by its peers like Bajaj Electricals and Havells India. We initiate coverage on V-Guard Industries with a Buy recommendation and a price target of Rs228 at 12.5x FY2012 EPS (that is a 20% discount to its peers’ current valuations on consensus FY2012 earnings estimate)
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