Leading luggage giant, VIP Industries rose nearly 16% in a single day and crossed over Rs 500 apiece mark. On March 28, VIP shares witnessed a strong bullish tone after Prabhudas Lilladher upgraded its outlook on the company to BUY from earlier HOLD on the backdrop of double-digit revenue growth in Q4FY24, and aspiration to clock 15% EBITDA margin from 2HFY25E onwards. In the long-term, VIP shares have given impressive returns, turning over Rs 4 lakh to nearly Rs 14.5 lakh since the first stock split, a growth of over 204%.
VIP Industries Prabhudas Lilladher Upgrade:
Jinesh Joshi, Research Analyst, Prabhudas Lilladher said, We attended the analyst meet of VIP industries (VIP) wherein management unveiled plans for product innovation (new launches were on display; premiumization, leadership and supply chain management."
In a research report, Joshi added, "On fruition, the revival strategy is likely to result in market share gains while EBITDA margin is likely to improve to 15% from 2HFY25E once warehousing, freight and accelerated spends on e-com stabilize.
He further said Prabhudas broadly maintains its estimates and expects sales/EBITDA CAGR of 12%/37% over FY24E-FY26E on the back of said revival plan.
Giving rationale, Joshi highlighted four key points for VIP Industries:
Leadership refurbishment can drive change:
More than 50% of VIP's top-level management is either new or handling new products.
Most brands now have separate heads. Decentralization, as per Joshi, can lead to improvement in business especially in the premium segment (Carlton & Caprese) as the customer is not just fixated on price and positioning/branding is equally important.
2. Rising focus on premiumization:
VIP plans 25 exclusive Carlton stores and 16 airport outlets by FY25E. Similarly, new designs for Caprese are also expected to be launched soon while Kiara Advani has been roped in as brand ambassador.
The analyst believes a renewed focus on premiumization would not only act as a key margin lever but also drive growth.
Supply chain optimization on the cards:
According to the analyst, the larger part of the inventory is less than 1 year old and the probability of obsolescence is low given SL has fewer design imprints.
Revolutionizing with product innovation:
Prabhudas analyst believes efforts to drive innovation and strengthening partner connect (2 dealer-distributor meets and one backpack roadshow was conducted recently) is likely to address growth challenges.
On the valuation, Prabhudas analyst said, " We upgrade VIP to a BUY (earlier HOLD) with a revised TP of Rs603 (earlier Rs589) after assigning a multiple of 33x (earlier 38x) as we roll forward to FY26E. Our upgrade is driven by 30% correction over the last 6 months and the ensuing valuation comfort (VIP trades at ~17% discount to its LPA history of past 10 years)."
VIP Industries Share Price:
On BSE, VIP share price ended at Rs 525.85 apiece, up by 13% with a market cap of Rs 7,464.54 crore on March 28. During the trading session of this day, VIP shares touched an intraday high of Rs 539.40 apiece with an overall single-day upside of 16%.
The VIP share price is undervalued compared to its 52-week high of Rs 722.70 apiece. Meanwhile, it is currently up by 17% from its 52-week low of Rs 449.40 apiece.
VIP Industries Stock Split Charm:
Although VIP has never issued bonus shares, the company has turned ex-split once. The company's 1:5 stock split ratio came into effect on October 31, 2011. The record date for eligible shareholders was November 1, 2011. The face value of the stock trimmed from Rs 10 each to Rs 2 each.
Now, let's take an example! Let's suppose you held 500 shares of VIP before October 31, 2011. Your 500 shares will multiply 5 times, totalling 2500 shares (500 X 5).
Considering the stock level of Rs 173.20 on BSE during its ex-split day, your 2,500 shares were valued at Rs 4,33,000 around that time.
This Rs 4.33 lakh investment rises to Rs 13,14,625 on the closing price of March 28, 2024. While the gains jump to Rs 13,48,500 on March 28th intraday price.
The long-term gains in VIP are even higher if rewards of dividends are added too. VIP has a strong track record of paying dividends to its shareholders.
As per Trendlye, the company has delivered up to 33 dividends since August 2001. In the last 12 months, the company paid up to Rs 2 dividend per share.
Established in 1968, VIP Industries Limited is amongst the World's leading manufacturers and retailers of luggage, backpacks and handbags and an established leader in the organised luggage market in India. In addition to its strong presence in India, the company has a growing global footprint with our products supplied in over 45 countries.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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