Buy VIP Industries; target of Rs 490: Motilal Oswal

Motilal Oswal's research report on VIP Industries

VIP Industries’ 2QFY26 print was below our estimates. Consolidated revenue declined 25.3% YoY and the company reported losses at the EBITDA/PAT level. The revenue decline was on account of 1) its focus on secondary sales by rationalizing trade discounting; 2) low uptick in BBD sales on e-com platforms as demand was skewed towards products owing to higher GST cuts, 3) lower trade discounting in MT/GT channels, and 4) lower realization. VIP cut its inventory by INR677m in 1H, and we expect to liquidate the remaining slow-moving inventory (INR250-300m) in the next quarter. In addition, VIP identified certain non-core assets (INR1.2b) for potential liquidation in the near term. With Multiples Private Equity acquiring a controlling stake, there is strong confidence in the brand’s revival potential. We expect the refreshed strategy to be anchored to 1) augmenting supply-chain efficiency with a focus on secondary sales, 2) enhancing employee productivity, 3) divesting low-profitability brands, 4) expanding its retail footprint to high-throughput locations, and 5) realigning e commerce discounting

Outlook

We cut FY26E/FY27E earnings by 294.0%/ 16.1% and retain BUY with a revised TP of INR490 (implying 50x Sep’27E EPS). Risks: local competition, significant rise in input costs, prolonged disruption in Bangladesh facility (refer to our IC note dated Sep’25).