Result Update: VIP Industries Ltd - ACCUMULATE - TP Rs.570 - Kotak

Multi quarter super performance - VIP Industries has reported its strongest quarter in the history of the company. The strength of the performance indicates strong volume growth in a seasonally strong quarter for the company, improvement in realisations with pass through of raw material price inflation and sustained efforts by the company to improve its performance.

Key Highlights

- VIP has reported strong sales of Rs 5.18 bn (+42.8% QoQ and +29.5% YoY) net of all taxes. Management indicated that the domestic segment remains strong for the company. Reduction in GST rate from the peak of 28% to 18%, increase air travel and Q1 Indian marriage season propelled the demand.

- Healthy realisations, strong demand and favorable product mix has helped the company with its strongest ever EBIDTA of Rs 911 mn with EBIDTA margin of 17.6 % (+260 bps QoQ and +230 bps YoY). It is commendable that the margins have improved by a significant proportion despite an inflationary cost environment. The current quarters strong margins has prompted us to increase our margin assumption by 100 bps each for FY19E and FY20E

- Consequently PAT was reported at Rs 599 mn ahead of our expectation of Rs 411 mn. We interpret the results as very strong for the company.

Valuation & Outlook

- We estimate the company to be a major beneficiary of increasing penetration of luggage bags and back-packs in the country, improving living standards leading to increased air and rail travel and also the desire for travellers to have branded luggage.

- We are increasing our earnings estimate to Rs 12.3 per share (from Rs 11) for FY19 and to Rs 14.2 per share (from 12.7) on the back of strong operational performance in Q1FY19, healthy volume growth and strong guidance We now estimate a revenue CAGR of 21% and earnings CAGR of 26% over FY18 to FY20E with strong operating margins and return ratios. The stock has run by more than 30% since our last update, but still offers upside owing to its continued strong performance. We now Recommend an ACCUMULATE for this high growth stock with an increased TP of Rs 570 (from Rs450) at 40x FY20E (increased from 35x).

Shares of V.I.P.INDUSTRIES LTD. was last trading in BSE at Rs.563.25 as compared to the previous close of Rs. 592.85. The total number of shares traded during the day was 81035 in over 1620 trades.

The stock hit an intraday high of Rs. 600 and intraday low of 563.25. The net turnover during the day was Rs. 46487157.

Source : Equity Bulls

Keywords