Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- V-Guard Industries Ltd (BOM:532953, Financial) reported a healthy top-line growth with consolidated net revenues of INR 1,294 Crore in Q2 FY25, marking a 14.1% increase year-over-year.
- The electronic segment, including stabilizers, inverters, and batteries, saw a revenue increase of 18.8%, driven by strong performance in summer products and solar power systems.
- The electrical segment, comprising wires, pumps, switchgears, and modular switches, registered a 16.3% growth year-over-year, with wires witnessing significant growth.
- Gross margins improved to 35.8% in Q2 FY25 from 33.8% in the previous year, aided by a higher share of in-house manufacturing and cost-saving initiatives.
- Effective management of working capital led to robust cash flows, with INR 336 Crore generated from operations in H1 FY25, facilitating debt repayment from acquisitions.
Negative Points
- The consumer durable segment reported a modest top-line growth of 10.6% year-over-year, with the kitchen appliances business facing a slowdown.
- Sunflame, a part of the consumer durable segment, reported a 1.1% decline in top-line growth year-over-year, impacted by reduced orders from the CSD segment.
- The Eastern market, a strong region for V-Guard, was affected by inclement weather, impacting sales.
- There was a marginal impact of 0.6% on company-level growth due to volatility in copper prices affecting the wires segment.
- The EBITA margin, although improved, was only 30 basis points higher than the previous year, indicating limited margin expansion.
Q & A Highlights
Q: Can you bifurcate the growth between stabilizers and batteries in the electronic segment? Has there been any change in the battery category?
A: We don't provide product-wise numbers, but stabilizers, inverters, batteries, and solar have all contributed to growth. Batteries have seen decent growth in both Q1 and Q2, benefiting from a strong summer. - Mithun Chittilappilly, Managing Director
Q: What is the current manufacturing versus outsourcing percentage, and how does this impact margins?
A: Currently, about 65% of our production is insourced, and 35% is outsourced. While insourcing can improve margins, some of the benefits are passed back to the market to enhance competitiveness. We are still 1% to 1.5% behind our pre-COVID gross margin levels. - Mithun Chittilappilly, Managing Director
Q: How has the consumer durable segment performed, particularly water heaters?
A: The consumer durable segment has seen moderate growth. Water heaters have experienced muted growth due to delayed summer and extended summer conditions, affecting the onset of the winter season. - V Ramachandran, Director & Chief Operating Officer
Q: What is the outlook for the Sunflame business, and how has it performed against expectations?
A: Sunflame's gross margins remain intact, but top-line growth has been impacted by challenges in modern trade and e-commerce transitions. We expect the business to pick up in the next 3 to 4 quarters as these issues are resolved. - V Ramachandran, Director & Chief Operating Officer
Q: How do you view the demand situation for your categories, and what is the growth trajectory for the next 1 to 1.5 years?
A: While there is slowness in the market, V-Guard's diversified portfolio has helped maintain growth. Electronics growth is driven by weather, and electrical has benefited from price growth in wires and cables. We remain cautious about the environment going forward. - Mithun Chittilappilly, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
