Prabhudas Lilladher's research report on V.I.P. Industries
Though VIP’s topline was 10%/7% below our/consensus estimates, GM of 53.3% surprised positively despite RM cost inflation. Price hike of ~4.5% taken in March, favorable product mix and rising contribution from low cost destination Bangladesh cushioned margins. While we cut our FY23E EPS estimates by 6% as we trim our GM assumption by 100bps amid persistent cost inflation and emerging supply side constraints as RM at Bangladesh unit comes from China, our FY24E estimates are broadly intact. VIP has ear-marked a capex of Rs300-350mn for FY23E to further expand own manufacturing capacity at Nashik/Bangladesh. Increased self-sufficiency in manufacturing will reduce reliance on imports and not only eliminate currency volatility but also reduce freight cost resulting in margin expansion.
We retain BUY with a revised TP of Rs817 (45x FY24E EPS) as 1) demand recovery is sharp and 2) structural margin levers are in place. VIP trades at 42x/33x our FY23E/FY24E EPS estimates with sales/PAT CAGR of 28%/96% over FY22-FY24E.
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