Business Standard

VIP Ind scales down growth guidance in FY13

Stock will remain under pressure

Priya Kansara Pandya  |  Mumbai 

VIP Industries' stocks faced severe selling pressure throughout today’s trading session and finally closed with a 6.7% loss in its value after the company reported discouraging performance in March 2012 quarter thanks to loss of business from Civil Services department (the company’s largest customer forming around 20% of sales) and the rupee depreciation.

The management has scaled down their growth guidance for FY13. From 17-20% earlier, now the company expects to grow 15% in FY13  due to impact of price hike on volumes, less visibility from CSD, subdued demand in international market and strong competitive pressures.

After 5% in FY12, the company has planned for a price hike of 5-10% in the current fiscal but the timing and extent will depend on the competitior’s action. Neverthless, the company is confident to retain its market leadership (57% market share) as soft luggage (two-third of overall revenues) is growing at a robust rate of 30% (faster than hard luggage) with underling of 20%.

Margins will continue to remain under pressure due to less business expected from high-margin CSD, possibility of rupee going to 57-58, full tax rate and focus on modern trade, which is a more expensive channel.

While profit before tax of Rs 95 crore in would be maintained in for the core business, launch of ladies handbags will eat away Rs 10 crore (expected loss). In short, the company is likely to face headwinds in terms of margins but no so much on the topline. The current quarter will continue to disappoint as marriage season has not been strong this year (not many muhurats) and rupee depreciation was not there at all in same quarter last year.

At 16 times FY13 estimated earnings, the stock is not trading cheap and hence may face selling pressure.

RECOMMENDED FOR YOU

VIP Ind scales down growth guidance in FY13

Stock will remain under pressure

VIP Industries' stocks faced severe selling pressure throughout today’s trading session and finally closed with a 6.7% loss in its value after the company reported discouraging performance in March 2012 quarter thanks to loss of business from Civil Services department (the company’s largest customer forming around 20% of sales) and the rupee depreciation.

VIP Industries' stocks faced severe selling pressure throughout today’s trading session and finally closed with a 6.7% loss in its value after the company reported discouraging performance in March 2012 quarter thanks to loss of business from Civil Services department (the company’s largest customer forming around 20% of sales) and the rupee depreciation.

The management has scaled down their growth guidance for FY13. From 17-20% earlier, now the company expects to grow 15% in FY13  due to impact of price hike on volumes, less visibility from CSD, subdued demand in international market and strong competitive pressures.

After 5% in FY12, the company has planned for a price hike of 5-10% in the current fiscal but the timing and extent will depend on the competitior’s action. Neverthless, the company is confident to retain its market leadership (57% market share) as soft luggage (two-third of overall revenues) is growing at a robust rate of 30% (faster than hard luggage) with underling of 20%.

Margins will continue to remain under pressure due to less business expected from high-margin CSD, possibility of rupee going to 57-58, full tax rate and focus on modern trade, which is a more expensive channel.

While profit before tax of Rs 95 crore in would be maintained in for the core business, launch of ladies handbags will eat away Rs 10 crore (expected loss). In short, the company is likely to face headwinds in terms of margins but no so much on the topline. The current quarter will continue to disappoint as marriage season has not been strong this year (not many muhurats) and rupee depreciation was not there at all in same quarter last year.

At 16 times FY13 estimated earnings, the stock is not trading cheap and hence may face selling pressure.

image

LIVE MARKET

BSE 26283.09

-109.29 (-0.41 %)

NSE 7971.30

-30.65 (-0.38%)

Widgets Magazine

STOCK WATCH

Company Price() Chg(%)
SREI Infra. Fin. 46.00 8.24
ISGEC Heavy 5646.80 8.17
Mah. Seamless 167.25 7.59
NIIT Tech. 465.55 7.42
Global Offshore 579.05 7.31
> More on BSE Gainers
Company Price() Chg(%)
Rasoya Proteins 0.25 25.00
SREI Infra. Fin. 46.15 8.21
Mah. Seamless 168.10 8.10
NIIT Tech. 466.35 8.01
Mercator 23.50 7.80
> More on NSE Gainers
Company Price() Chg(%)
Sunrise Asian 234.70 -9.97
Guj Pipavav Port 171.55 -6.89
Mahindra Finance 254.15 -4.97
Metalyst Forg. 53.65 -4.96
Goldline Intl. 195.30 -4.96
> More on BSE Gainers
Company Price() Chg(%)
Ess Dee Alumin. 279.75 -8.10
Guj Pipavav Port 170.60 -7.48
Mahindra Finance 252.65 -6.15
Shrenuj & Co. 49.65 -4.98
Castex Tech 60.65 -4.94
> More on NSE Gainers
Widgets Magazine
Widgets Magazine
Widgets Magazine

Derivatives

Index
Instrument Type
Expiry Date
Option Type
Strike Price