VIP Industries back in the black in Q1FY22; stock zooms 14%

The company's consolidated net profit stood at Rs 2.53 crore in Q1FY22 compared with net loss of Rs 51.32 crore in the year-ago period.

Shares of VIP Industries vaulted 14 per cent to Rs 439 on the BSE in the intra-day trade on Thursday after the company posted turnaround numbers for the quarter ended June 30, 2021 (Q1FY22). At 10:45 AM, the stock was ruling 13 per cent higher at Rs 436.5 apiece on the BSE as against a 0.23 per cent gain in the benchmark S&P BSE Sensex.

VIP Industries, which is the leading manufacturer of hard and soft luggage in Asia, reported a consolidated net profit stood at Rs 2.53 crore in Q1FY22 compared with net loss of Rs 51.32 crore in the year-ago period. Consolidated revenue from operations, meanwhile, surged 411.43 per cent to Rs 206.21 crore as against Rs 40.32 crore in Q1FY21. The profit before tax was at Rs 1.85 crore relative to pre-tax loss of Rs 67.38 crore in Q1FY21.

"The Q1FY22 revenue sequentially was impacted due to Covid-19. The revenue stood at 85 per cent of last year March quarter at Rs 221 crore. Hard Luggage constituted 39% of total revenue for this quarter. Gross Margin was at 54 per cent during the quarter, mainly due to lower discounts and better mix in favor of higher margin products and price increase," the company said in a statement.

The overall expense skid 18 per cent as compared to Q4FY21 due to reduction in CSR spends, factory related costs as plant was shut for some time and elimination of all discretionary spends. Employee cost was almost in line with last year in the same period as well as sequential quarter. 

On the oprational front, Ebitda (earnings before interest, tax, depreciation, and amortisation) was at Rs 27 crore at the end of the June quarter compared with Ebitda loss of Rs 38 crore last year. Ebitda margin stood at 12 per cent during the quarter compared with -65 per cent during Q1 June 2020.

Brokerage firm Prabhudas Lilladher has upgraded the stock to 'Buy' with a target price of Rs 457, and have increased their FY22/FY23 EPS estimates by 44 per cent/5 per cent, respectively as demand recovery post second wave looks significantly better than their original anticipation.

"However, bigger surprise was GM expansion to 50.9 per cent (almost similar to pre-Covid levels) resulting in significant earnings upgrade for FY22. In the entire last fiscal, VIP faced headwinds on margin side with a fear that demand recovery will be back-ended and restoring margins to pre-COVID levels can be a tall task given stiff competition & RM cost inflation. Nonetheless, as 1Q performance is noteworthy both on margin and demand recovery front we increase our target P/E multiple to 30x (earlier 28x) and arrive at a TP of Rs 457 as well roll forward our valuation to Sep23," the brokerage said in a result update.