Accumulate VIP Industries; target of Rs 325: Kotak Securities

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Kotak Securities' research report on VIP Industries

VIP has reported second straight strong quarter with significant improvement in revenues, operating margins and earnings. This is on the back of improving luggage penetration in the country and sustained efforts by the company to improve its performance. Sales was reported at Rs 3.09 bn (+8% YoY). EBIDTA margin was reported at 11.3% (+210 bps YoY) with improving volumes and realisations and lower raw material cost. Consequently, PAT was reported at Rs 242 mn (+33% YoY). We estimate the company to be a major beneficiary of increasing penetration of luggage bags and back-packs in the country and increased air and rail travel.

Outlook
We estimate revenue CAGR of 17% and earnings CAGR of 28% over FY17 to FY20E with improvement in operating margins and return ratios. Due to the rally in the stock price since our initiating coverage, we are now recommending ACCUMULATE (from Buy) with an unchanged TP of Rs 325 at 30x FY19 earnings.

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