Result update| Luggage
February 8, 2019
VIP Industries
Accumulate
CMP
`490
Margin pressure was an unexpected disappointment
Target Price
`542
Strong growth in revenue: For Q3FY2019, VIP Industries (VIP) posted a strong
Investment Period
12 Months
yoy growth of 27% in revenue to `430 cr mainly led by 30-35% volume growth.
Stock Info
This growth was above our expectation of 21%. The company is garnering market
Sector
Luggage
share from the unorganized market specially from backpacks and new categories
Market Cap (` cr)
5,909
which is driving such strong growth in its top line.
Net Debt (` cr)
-
Margins were under pressure: OPM were down at 8.8% on yearly basis which has
Beta
1.4
come down from the peak level of 18.6% reported in Q1FY2019. Margin
pressure was seen mainly due to ~10% rupee depreciation against dollar and
52 Week High / Low
645/283
rise in import duty on finished goods. The company has not been able to
Avg. Daily Volume
1,58,893
completely pass on cost hike especially at the lower priced categories like
Face Value (`)
2
backpacks and Aristocrat. Margin pressure is expected to continue in coming 1-2
BSE Sensex
36,546
quarters.
Nifty
10,943
PAT fell by12% yoy: Interest cost continued to remain very low at `0.7 cr.
Reuters Code
VIPI.BO
Depreciation increased to `4.4 cr mainly led by capex in its Bangladesh unit.
Bloomberg Code
VIP@IN
Overall, PAT fell by 12% to `24 cr versus our expectation of 20% yoy growth.
Outlook and Valuation: While the growth in volume remains encouraging and is
Shareholding Pattern (%)
likely to sustain as the company is in sweet spot in a fast growing luggage
Promoters
53.5
industry. However, we have cut our margin assumption for next two years in view
MF / Banks / Indian Fls
14.7
of competitive pricing pressure. Overall, we have cut our earnings estimates by
FII / NRIs / OCBs
10.5
~10% for FY2019 and FY2020 and are expecting a CAGR of ~26/29% in
Indian Public / Others
21.3
revenue/ earnings over FY18-20E. The stock is trading at 33.1x our FY2020
earnings, post recent correction. Looking at the near term margin pressure, we
Price chart
now recommend ACCUMULATE with a target price of `542 (35x rolled over on
700
average of FY2020E and FY2021E EPS).
600
500
Key Financials
400
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
FY2021E
300
Net Sales
1,252
1,410
1,804
2,255
2,751
200
% chg
2.9
12.6
28.0
25.0
22.0
100
0
Net Profit
85
127
161
209
255
% chg
28.2
48.8
26.8
30.3
21.7
OPM (%)
10.6
13.7
13.5
14.0
14.0
EPS (Rs)
6.0
9.0
11.4
14.8
18.0
Source: capital line
P/E (x)
81.5
54.6
43.1
33.1
27.2
P/BV (x)
17.0
14.2
12.5
10.3
8.5
RoE (%)
20.9
25.9
29.0
31.1
31.1
Nidhi Agrawal
022-39357800 Ext: 6872
RoCE (%)
29.1
36.9
41.4
44.5
44.9
EV/Sales (x)
5.5
4.8
3.8
3.1
2.5
EV/EBITDA (x)
51.7
35.3
28.3
21.8
17.8
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
1
VIP Industries |Result Update
Risks to our estimates
Volatility in foreign currency could impact the company’s profitability (75% of
its revenue comes from soft luggage, which is imported from China).
With closure of many luggage units in China (owing to pollution concerns),
the surviving suppliers have started taking price hikes which is could put
pressure on its margins, unless price hike is taken.
Increase in competition from unorganized players would impact overall
growth of the company
VIP’s 25% sales comes from hard luggage segment and any increase in input
cost (most of the key raw material is polypropylene and aluminum) could
negatively impact profitability
February 8, 2019
3
VIP Industries |Result Update
Research Team Tel: 022 - 39357800
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DISCLAIMER
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been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
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contrary view, if any
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Disclosure of Interest Statement
VIP Industries
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
February 8, 2019
4
