Hold V.I.P. Industries; target of Rs 494 Prabhudas Lilladher

Prabhudas Lilladher's research report on V.I.P. Industries

VIP reported weak performance with an adjusted bottom-line loss of Rs366mn (PLe loss of Rs215mn) led by deterioration in GM amid heavy discounting on ecom channel. For FY25E, we expect loss of Rs219mn despite penciling 9.2% topline growth and Gross/EBITDA margin of 47.4%/8.7% in 2HFY25E. For FY26E/FY27E we cut our EPS estimates by ~10% as we re-align our interest cost assumptions given deleveraging timeline has been delayed. Unless slow moving SL inventory is fully liquidated within next 1-2 quarters warehousing, freight and interest cost will remain high pressurizing profitability. Further, predatory pricing on e-com has impacted off-take in traditional channels acting as an hindrance towards growth.

Outlook

Given these twin challenges, we expect sales CAGR of 8.3% over FY24-FY27E with EBITDA margin of 6.3%/15.6%/16.0% in FY25E/FY26E/FY27E. Retain HOLD on the stock with a TP of Rs494 (30x FY27E EPS; no change in target multiple).