Prabhudas Lilladher's research report on VIP Industries
We cut our FY25E/FY26E EPS estimates by 14%/8% and downgrade the stock to a ‘HOLD’ (earlier ‘BUY’) with a revised TP of Rs557 (earlier Rs603) as we re-align our interest cost assumptions amid rise in working capital debt to Rs5,328mn resulting from pile up of SL inventory. Management expects SL inventory liquidation of Rs2,000mn in FY25E and we expect warehousing, freight and interest expenses to remain elevated until then. Though a new plan was unveiled recently on product innovation and premiumization we believe VIP is likely to face near term challenges in liquidating high SL inventory and resolve issues surrounding supply chain management.
Outlook
We expect sales CAGR of 11% over FY24-FY26E with EBITDA margin of 13.8%/15.4% in FY25E/FY26E. We downgrade to ‘HOLD’ with TP of Rs557 valuing the stock at 33x FY26E EPS (no change in target multiple).
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