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    V-guard's earnings growth to remain high despite margin squeeze

    Synopsis

    The co's EBIDT margin for the March quarter was 5.5% in comparison to 9.6% in the corresponding quarter of the previous year, due to higher advertisement spends and raw material cost.

    MUMBAI: South based V-Guard reported lowest operating margin since the time of its listing in 2006. Its EBIDT margin for the March quarter was 5.5% in comparison to 9.6% in the corresponding quarter of the previous year, due to higher advertisement spends and raw material cost. The profitability is likely to remain subdued in the current quarter, as the company has aggressively spent on advertisements, especially in the Indian Premier League.

    However, this should not be a concern for the long-term investors as this will help the company improve its brand visibility, especially in non-south region which will be the key growth driver in the next few years. Last five years' trend shows that though the company's profitability is lowering, its earnings have grown at, at least 20% year on year for the last five years.(see chart)

    Aggressive marketing in the earlier years has helped V-guard to grow its revenues at a 35% CAGR and earning at 26% CAGR over the last five years. Despite margin squeeze in the near term, high sales growth will help the company to continue growing at more than 20% for the next few years.




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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