VIP Industries Ltd. share price target

VIP reported significantly weaker than expected Q1FY21 results. This was due to adverse impact of COVID-19 which has affected luggage sales. Its net sales fell 92.9% YoY at Rs 403mn (significantly below our forecast). It reported an EBITDA loss of Rs578 mn due to sharp fall in sales and sticky employee costs (fell only 7.3% QoQ to...

Topline slumps as revenue for March month falls 76%: Topline declined 28.4% YoY to Rs3,113mn (PLe of Rs3,993mn) as there was a revenue loss of Rs1.2bn due to COVID-19. Revenues in Jan & Feb of 2020 stood at Rs2.8bn. However,...

The Covid-19 pandemic has had a grievous impact on the global travel industry and retail environment. Revenues for Q4FY20 fell 28% YoY to | 311.3 crore. While sales in January-February fell 7% YoY to | 279.0 crore, March was a complete washout with revenues down 76% YoY to | 32.0 crore. The company's procurement from own facility in Bangladesh increased substantially from 10-15% to 55% in Q4FY20. This translated into gross margin expansion of ~1000 bps to 57.6%. Owing to negative operating leverage, EBITDA margins (adjusting for Ind-AS 116) contracted...

Since revenue contribution for VIP is skewed towards the first quarter of the financial year (~30% of revenue), disruption on the supply side may pose a risk to growth for FY21. We remain cautious on the near term outlook, amid headwinds faced by the luggage industry. Owing to its healthy balance sheet (D/E: 0.1x, NWC days: 85) and strong brand patronage among consumers, VIP's business model has the inherent ability to tide over tough market conditions. Furthermore, owing to its strong manufacturing capacity (Bangladesh: soft luggage, India: hard luggage), it is well placed compared...

VIP Industries (VIPIND) Q3FY20 performance was subdued and missed our estimates on all counts. Despite flat revenue growth of 0.5% in Q3FY20 (high base, lower e-commerce contribution, forgone institutional business to maintain margins

VIP reported better than expected profitability in Q3FY20 although top-line was lower than our forecast. VIP's net sales remained flat YoY at Rs4,324 mn (4.3% below our forecast) as it lost market share. Nevertheless, EBITDA margin was 136ps ahead of our estimate at 15.7%. Gross margin expanded 560bps YoY to 53.3% due to improved terms in sourcing raw materials. Looking ahead, the company foresees challenges in procuring soft luggage from China due to the outbreak of coronavirus. Nevertheless, VIP believes it remains better-placed...

We cut our EPS estimates by 5%/7% for FY21E/FY22E and downgrade the stock from BUY to HOLD as 1) VIP has ceded market share due to rising competitive intensity 2) growth concerns can aggravate further if there is an extended factory shut down in China due to Coronavirus mayhem as only 60% of the requirements for 1QFY21 (strongest quarter) are currently hedged by placing advance orders and 3) extended slowdown in discretionary spending amid weak environment has structurally de-railed the growth momentum. Despite near term growth headwinds, margin performance has...

We initiate coverage on VIP Industries (VIP) with a BUY rating and a target price of Rs574 based on PER of 32x FY22E. VIP is a proxy play on rising spends towards travel and tourism in India. It is a leader in an industry dominated by unbranded players. Further, it has established brands, strong distribution network, skilled management and strong product portfolio. We expect its sales/EBITDA/net profits are to grow at CAGR of 11%/25%/20% over FY19-22E, respectively. We believe that the premium valuation (PER of 24.4x FY22) is justified given significant growth prospects (60% market unorganized), strong...

We cut our EPS estimates by 8.8%/8.7% for FY20E/FY21E given aggravating concerns on growth amid slowdown in discretionary spends. All channels except for e-com have struggled but a diversified mix has helped VIP tackle slowdown concerns better. Despite subdued top-line growth, gross margin expanded 250bps YoY to 53.3% amid improved negotiation with Chinese vendors who are saddled with excess capacity after increase in import duty by the US. The gross margin advantage got nullified at the operating level due to 19% YoY increase in employee expenses due to addition of manpower and...