V-Guard Industries (VIL) posted revenue of Rs6.3bn in 3QFY20, up 5% YoY, 5%/3% below our/consensus estimates. Growth was lower as consumer sentiment remained sluggish, leading to softer demand and aggressive price cutting by some players in water heater, fans and switchgears, which VIL did not resort to as it gave precedence to profitability. Revenue of Electricals segment grew 5% YoY to Rs2.7bn, driven by growth in Pumps, while Consumer Durables segment revenue rose 10% YoY to Rs2bn, led by double digit growth in fans and water heaters. Electronics revenue was flat YoY at Rs1.5bn. Revenue from South region grew by 4% YoY to Rs3.9bn (62% of total sales), while Non-south region grew by 8% YoY to Rs2.4bn (38% of total sales). Gross margin jumped 320bps YoY to 33.2%, led by margin improvement across all segments due to premiumization, benign raw material cost and pricing actions. Consequently, EBITDA rose 32% YoY to Rs594mn, leading to an operating margin of 9.5%, up 190bps YoY, exactly in-line with our estimate. PAT grew by 27% YoY to Rs429mn, below our/consensus estimate of Rs462mn/Rs480mn. VIL aims to diversify revenue profile by expanding product portfolio and scaling up non-South region and channels like modern retail and e-commerce. While near term growth outlook depends on demand recovery and onset of summer season, VIL expects to sustain its gross margin profile. We have marginally tweaked our earnings estimate and maintained Accumulate rating on the stock with a revised target price of Rs237 (Rs245 earlier) based on 38x September 2021E EPS.