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.

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
Business Standard
177 22
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
Business Standard
177 22

LIVE MARKET

BSE

  ( %)

NSE

  ( %)

More News

STOCK WATCH

Company Price() Chg(%)
Jindal Steel 80.35 14.79
Bajaj Fin. 9853.40 9.75
Amtek Auto 51.60 7.50
DCM Shriram 230.65 6.68
JP Power Ven. 6.57 6.14
> More on BSE Gainers
Company Price() Chg(%)
Jindal Steel 80.35 14.70
Bajaj Fin. 9848.35 9.63
Amtek Auto 51.60 7.50
DCM Shriram 230.55 7.16
Aditya Bir. Fas. 148.60 6.14
> More on NSE Gainers
Company Price() Chg(%)
Caplin Point Lab 1110.35 -8.60
Unitech 7.02 -8.47
Welspun India 100.50 -7.29
Navin Fluo.Intl. 2287.75 -7.28
GHCL 210.10 -6.75
> More on BSE Gainers
Company Price() Chg(%)
Caplin Point Lab 1109.95 -9.33
Unitech 7.00 -8.50
Welspun India 100.10 -7.36
Firstsour.Solu. 49.25 -6.81
Karur Vysya Bank 481.55 -5.39
> More on NSE Gainers
Widgets Magazine
Widgets Magazine
Widgets Magazine

Derivatives

Index
Instrument Type
Expiry Date
Option Type
Strike Price

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard