Buy VIP Industries; target of Rs 295: Edelweiss

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Edelweiss' research report on VIP Industries

We met Mr. Dilip Piramal, MD, VIP Industries (VIP) to gain insight about the company’s strategies. Management sounded optimistic on the sales growth (~15%), driven by strong travel industry (particularly air travel) and low penetration of branded luggage (20-25%), having regained share from peer Samsonite in past 2 years. While margins may be under pressure in near term due to higher tax rate under GST (28% versus 18% earlier) and cost pressures in China, VIP’s dominant position will allow passing these on (effected 6% price hike in June). Further, rising share of manufacturing with doubling of capacity in Bangladesh subsidiary (20% PAT margin) will support margins. With uptick in discretionary spending, ~50% market share in underpenetrated luggage market with a portfolio of brands, and shifting focus towards manufacturing versus trading, we upgrade our FY19E earnings by 5% and P/E to 30x (24x earlier), at 10% discount to higher band. We expect VIP to post 15% sales and 29% PAT CAGR over FY17-19 with strong 808bps RoCE expansion to 41%. Maintain ‘BUY’ with a revised target price of INR295 (INR225 earlier).

Outlook

With strong drivers (air traffic growth, improving market share) and shifting focus towards manufacturing from trading, we raise our FY19E earnings by 5% and P/E to 30x. Maintain ‘BUY’. At CMP, the stock is trading at 25.2x FY19E EPS.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More