Shares of V-Guard Industries Ltd have seen a smart rebound, rising over 11% from the lows they hit in mid-August. Expectations of resumption of economic activity during the festive season and pick-up in sales of consumer appliances and durables have improved sentiments on the stock.
Analysts at HDFC Securities Ltd said the company had taken a severe hit compared to its peers during the lockdown, noting that it derives a significant portion of its sales from southern and eastern India during the second wave of the pandemic. were more affected. .
The electronics segment like stabilizers and air coolers saw a huge impact in sales as normal peak season demand was missing. With lower operating leverage, EBITDA margin declined 521 basis points sequentially. One basis point refers to one-hundredth of a percentage point while EBITDA stands for earnings before interest tax depreciation and amortization.
However, the outlook is good and sales are expected to improve in the subsequent quarters. Analysts at HDFC Securities said a recovery in demand and normal trading inventories could help it recover faster. Analysts at Emkay Global highlighted that the revenue momentum in July was strong and the company plans to take a 1.5-2% price hike, in addition to the 6-7% growth already affected, to offset the impact of commodity inflation. is of.
So investors will keep an eye on the sales momentum going forward. Analysts say the only worry is that the reopening of businesses in South India is still slow compared to other regions. Although on a positive note, industrial and project activities have continued this year and should be positive for B2B demand.
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