Prabhudas Lilladher's research report on V.I.P. Industries
VIP’s PAT was 7%/14% above our/street estimates signifying that demand recovery is significantly better than expectations. In fact, PAT was only 2% lower than comparable pre-COVID quarter indicating VIP is almost out of pandemic stress. We raise our EPS estimates by 5%/2%/1% for FY22/FY23/FY24 respectively to account for better than expected recovery and improved GM performance. VIP has plans to expand own manufacturing capacity (Rs360mn invested so far) which is likely to reduce reliance on external outsourcing. Post expansion, share of own manufacturing is likely to increase to ~65-70% as compared to ~40% earlier. Consequently, share of imports is likely to decline to less than 10% in coming years which will not only eliminate currency volatility but also reduce freight cost resulting in margin expansion.
Outlook
We retain BUY with a revised TP of Rs769 (42x FY24 EPS; 40x earlier) as 1) demand recovery is sharp 2) steps are being taken to arrest market share loss (contribution of Aristocrat, a mass brand, was 41% in 3Q) and 3) long term margin expansion is on the cards.
More Info on Trent
At 17:30 VIP Industries was quoting at Rs 648.40, down Rs 27.80, or 4.11 percent.
It has touched an intraday high of Rs 676.65 and an intraday low of Rs 640.75.
It was trading with volumes of 73,644 shares, compared to its thirty day average of 34,078 shares, an increase of 116.10 percent.
In the previous trading session, the share closed up 12.48 percent or Rs 75.00 at Rs 676.20.
The share touched its 52-week high Rs 688.00 and 52-week low Rs 309.00 on 02 February, 2022 and 19 April, 2021, respectively.
Currently, it is trading 5.76 percent below its 52-week high and 109.84 percent above its 52-week low.
Market capitalisation stands at Rs 9,171.91 crore.
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