VIP Industries Ltd (VIP) is the largest luggage player in India with ~50%+ market share in the organised market. It has been able to create successful sub brands like Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Caprese. We feel that the company is in very sweet spot where it is gaining market share from unorganised players and can grow at 25%+ CAGR for next couple of years.
Outlook and Valuation: Backed by robust growth in volume and better brand awareness, we expect VIP to report a CAGR of ~26% and 35% respectively in top line and bottom-line respectively over FY2018-20E. The recent correction has given the investors an opportunity to invest in a market leader with favourable demand dynamics. It is currently trading at a P/E of 29x its FY2020E EPS which looks attractive looking at its leadership position in a growing sector. Hence we initiate coverage on the stock with a Buy recommendation and target price of `555 (35x FY2020E EPS), indicating an upside of ~20% from the current levels.
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