Prabhudas Lilladher's research report on VIP Industries
We cut our FY26E/FY27E EPS estimates by 48.3%/6.6% as we re-align our GM outlook given the ongoing price war and tweak our interest expense assumptions. VIP reported a weak set of results with EBITDA margin of 1.3% (PLe 7.3%) due to higher-than-expected other expenses of Rs1,708mn (PLe Rs1,499mn). Higher performance marketing expenses on e-comm, professional fees, and investments in dealer conferences, and product roadshows uprooted the cost reset cycle evident in the last quarter. Barring e-com spends, the remaining costs are transitory in nature, and we expect other expenses to decline from 31.5% of sales in FY25 to 27.1% in FY26E and further to 26.1% in FY27E. Nonetheless, we believe recovery in GM would be back-ended as improvement in brand and channel mix will take some time to play out given the ongoing price war. Consequently, we expect GM of 48.5%/51.5% in FY26E/FY27E respectively.
Outlook
Overall, we expect sales CAGR of 9% over the next 2-years with EBITDA margin of 11.1%/15.4% in FY26E/FY27E. Retain BUY on the stock with a TP of Rs 404 (30x FY27E EPS; no change in target multiple).
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