Ventura initiates coverage on VIP Industries, sees upside scope of 35%
“Over FY23-27, we are expecting the company’s revenue/ EBITDA/ net earnings to grow at a CAGR of 14.6%/16.4%/18.5% to Rs 3,593 crore/Rs 581 crore/Rs 300 crore, respectively, while EBITDA and net margins are expected to improve by 96 bps to 16.2% and 105 bps to 8.4%, respectively. Return ratios – RoE and RoIC – are expected to improve by 694 bps to 30.7% and 2647 bps to 58.3% by FY27,” the brokerage report states.
Securities has initiated coverage on with a Buy rating and has recommended a price target of Rs 741 with a 24-month view. The target price signals an upside potential of nearly 35% from the current market price of Rs 551.“Over FY23-27, we are expecting the company’s revenue/ EBITDA/ net earnings to grow at a CAGR of 14.6%/16.4%/18.5% to Rs 3,593 crore/Rs 581 crore/Rs 300 crore, respectively, while EBITDA and net margins are expected to improve by 96 bps to 16.2% and 105 bps to 8.4%, respectively. Return ratios – RoE and RoIC – are expected to improve by 694 bps to 30.7% and 2647 bps to 58.3% by FY27,” the brokerage report states.
Ventura said that despite its revenue growth targets being below the company's guidance, achieving the projected revenue growth of 17% CAGR could lead to a further rerating of the stock and unlock additional upside potential.
Revitalising the product mix, enhancing distribution networks, new horizons in premium bags, boosting e-commerce presence, optimizing supply chains, increasing in-house manufacturing, and driving business performance with top management rejig, VIP is seizing growth opportunities in the luggage industry by rigorously reviewing SKUs, collaborating with dealers, and shifting from unorganized to organized sectors. Ventura has attributed these factors to its optimism for VIP industries.
The brokerage firm believes that the newly refreshed product portfolio and premiumization of product mix in addition to the renewed vigor in tourism and travel is expected to help regain market share to 43% and grow revenues at 17% CAGR (3-4% higher than the industry growth). Consequently, a faster reduction in inventories is expected to help improve the EBITDA margins to 15-17% over the next 2-3 years.
In the past 2 years, the stock has given negative returns to the tune of 19%. However, for the past 3 months, the counter has advanced 4%. As per Trendlyne data, out of 10 analysts tracking the stock, 4 have a Buy rating, 4 recommend holding the stock, and 2 have a sell view.
In an assertive effort to redefine its brand and product lineup, VIP has launched an all-encompassing strategy that positions the company at the forefront of the Indian luggage market. In response to shifting consumer needs and a competitive environment, VIP has rolled out a variety of innovative product introductions and strategic updates across its range of brands. This effort is further supported by monthly SKU reviews and phasing out products that fail to reach the monthly sales threshold benchmark.
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Source: Stocks-Markets-Economic Times
