Elara Capital downgrades VIP Ind to 'Accumulate', cuts estimates on Q3 miss

Elara Capital values the VIP Industries stock at 26x FY28E EV/Ebitda and has maintained its target price at ₹430

Brokerage firm Elara Capital has downgraded luggage and travel accessories maker VIP Industries to ‘Accumulate’ from ‘Buy’, citing continued weak performance in the October–December quarter of fiscal 2026 (Q3FY26).

 

According to the brokerage, elevated discounting to clear slow-moving inventory and heightened competition from direct-to-consumer (D2C) players weighed on growth momentum, leading to a 6.2 per cent revenue miss compared with its estimates. The company’s gross margin declined 1,707 basis points (bps) year-on-year (Y-o-Y) to 29.5 per cent, largely due to inventory provisioning of ₹54.32 crore in Q3FY26, marking the second consecutive quarter of elevated write-offs.

 

“VIP partnered with Chennai Super Kings to strengthen appeal among the youth and drive brand-led growth. Post the leadership transition, limited strategic visibility and continued weakness in brand and channel performance keep us cautious on the near- to medium-term outlook,” the brokerage said.

 

The brokerage values the stock at 26x FY28E EV/Ebitda and has maintained its target price at ₹430. The target price implies a potential upside of around 16 per cent from the February 18 closing price of ₹371 on the NSE. 

 

Around 12:30 PM, the VIP Industries share price was trading 3.22 per cent lower at ₹358.9 compared to the previous session's close. In comparison, the NSE Nifty50 was down 0.76 per cent at 25,624 levels. The market capitalisation of the company stood at ₹5,098.3 crore. The stock has fallen around 25 per cent from the 52-week high of ₹492.3 touched on July 15, 2025.

VIP Industries Q3 growth hit by competition and discounting

VIP Industries’ revenue fell 9.4 per cent Y-o-Y to ₹454.1 crore in Q3, as competitive intensity and elevated discounting weighed on performance. A muted recovery in physical channels amid store consolidation, along with rising competitive pressure in e-commerce from new entrants, further constrained growth.

 

The brokerage expects a revenue CAGR of 3.6 per cent over FY25–FY28E, supported by a richer product mix with premium SKUs, supply chain improvements, and stronger traction across distribution channels.  ALSO READ | Netweb share price zooms 20% in 3 sessions; buy, sell or hold?

Margins under pressure; recovery seen by FY28E

Gross margin declined sharply to 29.5 per cent from 46.5 per cent a year ago, primarily due to inventory provisioning following similar write-offs in Q2FY26.

 

Operating leverage weakened significantly, resulting in a 2,263 bps contraction in Ebitda margin to -16.9 per cent, with an Ebitda loss of ₹76.8 crore. Higher employee costs (up 3.2 per cent Y-o-Y) and other expenses (up 2.9 per cent Y-o-Y) further weighed on performance.

 

Excluding inventory provisions, gross margin stood at 41.6 per cent and Ebitda margin at 4.8 per cent. After adjusting for exceptional items, the company reported a net loss of ₹124.1 crore in Q3.

 

Elara Capital expects improved premiumisation, better pricing discipline, and operational improvements to support margin recovery, with Ebitda margin projected to reach 10.2 per cent by FY28E.

Estimates cut; cautious outlook retained

Analysts at Elara Capital have trimmed its revenue estimates by 3.6 per cent, 2.2 per cent, and 1.8 per cent for FY26E, FY27E, and FY28E, respectively, while maintaining its FY28E net profit estimate at ₹60.9 crore. 

 

The downgrade reflects the recent run-up in the stock price and continued operational challenges, including management churn, pricing pressure, and margin stress arising from slow-moving inventory.

 

Key risks for the company include failure to regain market share, intensifying competition, and sharp volatility in raw material prices.  Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.