Shares of VIP Industries are in focus after the profit of the world’s second-largest luggage maker more than doubled in the quarter ended September 2022.
The company reported a 134 per cent YoY rise in net profit at Rs 43 crore in the September quarter from Rs 18.5 crore in the year-ago quarter. Revenue from operations jumped 56 per cent to Rs 515 crore on a year-on-year basis, the luggage maker said.
At present, the stock is hovering near its 52-week high of Rs 774.50. The scrip has surged over 155 per cent in the last two years and over 700 per cent in the last 10 years.
Brokerages are largely bullish on this stock, as they believe that the company would be a key beneficiary of increased movement of leisure and business tourists, both domestically and internationally.
ICICI Securities said strong manufacturing capabilities in Bangladesh (for soft luggage) and India gives VIP an edge over its peers who depend mainly on imports.
Stabilising raw material prices and increasing proportion of in-house manufacturing are seen as translating into better margins. The brokerage finds VIP Industries worth Rs 850.
Prabhudas Lilladher is positive on the long-term prospects of the company, given a steady improvement in market share (400 basis points gain in last 1 year), reduced reliance on China and rising self-sufficiency in own manufacturing (70-75 per cent contribution likely in FY23E) and the emergence of new twin levers viz; handbags and exports.
“Given Q2FY23 performance, coupled with expected improvement in the market share, we increase our FY24E/FY25E sales estimates by 3 per cent,” it said while suggesting a price target of Rs 1,009 on the stock.
Nuvama Institutional Equities has a target of Rs 907 on the stock. There was an overall increase in expenses YoY, led by higher advertisement spending, employee cost and freight costs, and exchange rate fluctuation. Despite this, VIP reported an Ebitda margin of 13.9 per cent, up 120 bps YoY on account of higher revenue, it said.
“While we are raising FY23E revenue, we are cutting gross margin expectations based on trends till Q2FY23, which edges up the EPS by 1 per cent,” Nuvama said.
Dilip G Piramal, Chairman of VIP Industries in an exclusive conversation with Udayan Mukherjee, global business editor at Business Today TV said his company enjoys a 43 per cent market share and its aim is to reach at least 45 per cent market share during the ongoing financial year. He expects VIP to get the back to the high 40s the next financial year.
Watch here: Udayan Mukherjee In Conversation With Dilip G Piramal, Chairman, VIP Industries
“After the pandemic, China costs have become very high, our volumes have gone up so much that we are now rationalising all that. We will buy from China only what is barely the cheapest product there. Will buy a lot from India and Bangladesh,” he said, adding that “Gradually in the next two years, we should be in the optimum input position for input raw material that will save costs considerably.”
VIP Industries is a leading manufacturer of various types of luggage, backpacks and handbags. The brands include Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Caprese.
