 "VIP Industries, which was set up in 1971, has four factories that together produce nearly five million pieces annually")
Shares of VIP Industries have shot up 13 per cent to Rs 524.55 on the BSE in Thursday’s intra-day trade amid heavy volumes. This comes a after the management unveiled plans for financial year 2024-25 (FY25). The company is engaged in the business of manufacturing and marketing of luggage, bags and accessories.
At 10:35 am; VIP Industries was trading 12.5 per cent higher at Rs 523.65, as compared to 0.8 per cent gain in the S&P BSE Sensex. The average trading volumes on the counter more than tripled. A combined 8.4 million equity shares of the company have changed hands on the NSE and BSE.
However, the stock had hit a 52-week low of Rs 449.40 on March 20, 2024. It had corrected 38 per cent from its 52-week high level of Rs 722.70 on September 7 last year. The underperformance of the stock was due to weak operational performance mainly because of increased freight, accelerated investments in e-commerce channels, marketplace activation and professional fees for accelerating e-commerce growth.
However the management has now unveiled plans on product innovation, premiumization, leadership and supply chain management. On fruition, the revival strategy is likely to result in market share gains while EBITDA margin is likely to improve to 15 per cent from H2FY25E once warehousing, freight and accelerated spends on e-com stabilize.
The air traffic, passenger traffic, and hotel occupancy remains positive and therefore, the management is quite confident that starting from the March 2024 quarter (Q4FY24), the company’s sales number should start to increase. The management expects double digit revenue growth from Q4FY24.
Over 50 per cent of the senior management team at VIP is either new or is handling a new portfolio. Further, most brands now have separate heads. Decentralization can lead to improvement in business especially in the premium segment (Carlton & Caprese) as customers are not just fixated on price and positioning/branding is equally important.
Analysts Prabhudas Lilladher said they broadly maintain their estimates and expect sales/EBITDA CAGR of 12 per cent/37 per cent over FY24E-FY26E on the back of said revival plan. “We upgrade VIP to a BUY (earlier HOLD) with a revised target price of Rs 603 (earlier Rs 589) after assigning a multiple of 33x (earlier 38x) as we roll forward to FY26E. Our upgrade is driven by 30 per cent correction over the last 6 months and the ensuing valuation comfort (VIP trades at 17 per cent discount to its LPA history of the past 10 years),” the brokerage firm said in a report.
