Concall Summary: V-Guard Q4FY20

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  • IIFL
  • Investec
  • Jefferies
  • Edelweiss
  • Spark Capital
  • JM Financial
  • Emkay Global
  • Sundaram Mutual Fund

Business Overview:

  • Revenue at Rs 537 crore vs Rs 740 crore YoY
  • Gross margin at 33.3% vs 29.6% YoY
  • PAT at 33 crore vs Rs 59 crore YoY

ConCall highlights:

  • Revenue has been impacted to the extent of Rs 250 crore with EBITDA compression of about Rs 70 crore during the quarter due to Covid
  • Even before the lockdown, FY20 had been a slow year for growth
  • Non-South markets’ contribution increased to 40.5% of the net revenue in Q4FY20 as compared to 37.3% in Q4FY19
  • Wire factories at Chavadi and Kashipur have reopened in the last week of May and currently running at 33% capacity
  • Company will ramp up the capacity in next couple of weeks based on the consumer demand
  • Sales during April was near zero; May revenue was 70% of last year’s May revenue
  • 90% of May sales came from rural and suburb market
  • Southern and eastern markets are doing well as Covid cases are relatively lower in those market 
  • V-Guard didn’t cut salary but has deferred the increment
  • Collection has improved in the month of May
  • Channel inventory typically around 20-30 days but during lockdown it increased to 40 days
  • Revenue from four metro cities is around 15% of total sales
  • V-Guard has exited from LT Cable business which has very low gross margin of 8-9%; exiting from all low margin business and entering into high margin category 
  • Modular switches surprisingly doing well for the company
  • Inventory days has been increased to 100 days but will come down to around 50 days by the end of July
  • V-Guard has guided capex of Rs 35-40 crore for FY21; last year capex was Rs 90 crore. Company will hold non-essential capex like renovation of offices etc. this year
  • Gross margin for both south and non-south market has improved; margin for south market is 150 bps higher than non-south market
  • 35% of fan sales comes from decorative fan 
  • Gross margin in air cooler is around 35-40% depending upon the model; market leader enjoys 5-8% higher margin. V-Guard outsourc air cooler and doesn’t manufacture it
  • Market leader in fan has 3-5% higher margin
  • Revenue from eastern market is around 15%, but it was higher during May. Tamil Nadu contributes around 15% while Chennai alone 5%

Image source: Company website

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Karan Sharma

Karan Sharma

The Concall Summary Guy | CFA | Investor
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