Stock Review: V GUARD

Kerala-based V Guard is engaged in manufacturing of various electrical equipments, cables, solar water heaters and pumps and motors. It has a good brand recognition with a string presence in southern India. The future growth would be driven by the higher penetration in the Northern region of the country. We believe with ad spend-sales ratio of almost 10% and right branding strategy would allow this. The contribution from the northern region improved from 9% in FY09 to 15% in FY10. The only concern is its volatile operating margin. Its current P/E of 14 is quite reasonable and long-term investors can consider buying this stock.