Hold VIP Industries; target of Rs 455: Prabhudas Lilladher

Prabhudas Lilladher's research report on VIP Industries

We cut our FY26E/FY27E EPS estimates by 70%/14% given weak performance in 1QFY26 and assign HOLD rating (earlier “Under Review”) by valuing the stock at 40x FY27E EPS (~15% discount to SII IN). VIP IN reported weak set of results with topline declining 12.1% YoY to Rs5,614mn (PLe Rs6,325mn) as volumes were down by 8% amid weak growth in e-com channel. Adjusting for inventory provision of ~Rs150mn and one-off expense of ~Rs110mn, EBITDA margin stood at 9.0% (PLe 9.8%). We believe FY26E will be a year of cost reset and reorganization for VIP IN amid change of guard at top-level. We expect normalization to resume from FY27E with steady state GM/EBITDA margin of 51.5%/15.4% respectively.

Outlook

The stock trades at 40x FY27E EPS and we believe most turn-around benefits from strategic re-orientation are already priced-in. Assign HOLD with a TP of Rs455 (40x FY27E EPS). Better than expected topline performance can result in earnings surprise and is a key risk to our call.

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