Prabhudas Lilladher's research report on V.I.P. Industries
VIP posted strong recovery with top-line breaching the pre-pandemic base by a handsome margin of 24.9%. However, GM declined sequentially by 182 bps to 48.1% (PLe 50.3%) due to RM cost inflation. Given 2QFY23 performance, coupled with expected improvement in market share we increase our FY24E/FY25E sales estimates by 3% odd. However, our EPS estimates are broadly intact as we believe benefits of RM stabilization and rising share of own manufacturing will be partially offset by slightly inferior product mix. Aristrocrat’s share has increased from 22% in 2QFY20 to 37% in 2QFY23 and given the quest to gain market share (~43% odd currently) contribution of this mass brand is likely to increase further. Nonetheless, we remain positive on long term prospects given 1) steady improvement in market share (~400 bps gain in last 1 year) 2) reduced reliance on China & rising self-sufficiency in own manufacturing (~70-75% contribution expected in FY23E) and 3) emergence of new twin levers viz; handbags and exports.
Outlook
We expect sales/PAT CAGR of 15%/27% over FY23-FY25 and retain BUY with a TP of Rs1,009 (45x Sep-24E EPS; no change in target multiple).
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