Buy VIP Industries; target of Rs 204: Edelweiss

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Edelweiss' research report on VIP Industries

VIP Industries’ (VIP) Q4FY17 revenue at INR 3.1bn (up 12% YoY) and EBITDA at INR307mn (up 41% YoY) surpassed estimates 3% and 15%, respectively. Domestic revenue jumped 16% (6.5% in FY17) led entirely by volume growth. While gross margin rose to 48.3% (highest in 3 plus years), EBITDA margin expanded 208bps YoY to 10.0% fuelled by lower advertising & other expenses.

Outlook

Over the long term, VIP is well positioned as mix improves in favour of high-margin products and rising penetration of branded luggage. We estimate it to post 25% PAT CAGR and RoCE to expand 460bps to 37% over FY17-19. We maintain ‘BUY’ with TP of INR 204 (22x FY19E EPS). At CMP, the stock trades at 20.8x FY19E EPS.

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