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Highlights from the Quarter (Q4FY25):

• VIP Industries Ltd (VIPIL) reported a marginally weak quarterly net revenue of Rs.498.0cr for Q4FY25, lower by 4.2% YoY and 1.1% on a QoQ basis. The company reported an EBITDA of Rs.10.3cr for the quarter vs Rs.11.7cr for the same quarter in the previous year, and Rs.31.1cr in the preceding quarter. Subsequently, the company posted a net loss of Rs.27.3cr for the quarter.

• FY25 was described as a "year of big solves" across multiple areas, particularly focusing on repairing the balance sheet. The management expects FY26 to be considerably better, starting from the first quarter itself. In terms of inventory management, the company reduced its inventory by a further Rs.200cr in FY25, and intends to reduce it further by Rs.150cr in FY26.

• Profitability was a challenge in FY25, mainly due to downward pressure on selling prices (fueled by competition and heavy discounting, especially online), inventory provisions, and netting off price support for e-commerce. Multiple initiatives are underway to improve gross margins in FY26, starting from Q1. A better product mix, including increasing the premium portfolio share in e-commerce, is expected to help going forward. Manpower cost optimization resulted in a yearon-year decrease of 16% and quarter-on-quarter decrease of 20%. Additionally, the company closed 133 stores overall and opened 32. This was done to close non-performing stores, particularly in tier three/four cities with low throughput.

• With respect to brands, the company undertook a major new initiative which included a "find me tag" feature on VIP products from July 1st onwards. This is described as a special feature that is unique globally. The company is actively focusing on opening Carlton exclusive stores. The plan is to open 20 Carlton exclusive stores in FY26 (out of a total of 50 planned exclusive stores). The motivation is to have a full Carlton assortment to achieve better premium positioning and revenues.

• The management acknowledged missing the previous EBITDA guidance of 12%. The primary reason cited was selling some inventory items at cost or very little margin to accelerate reduction. However, going forward the management expects a much more positive FY26 and beyond.

OUTLOOK AND VALUATION

We maintain our target of Rs.677 as mentioned in the previous quarter. Despite the lackluster performance in FY25, we are positive on the future outlook of VIP Industries considering their accelerated push to normalize inventory. Factoring the positive comments from the management, paired with the robust Indian Luggage market, we expect FY28E revenue at Rs.2914.0cr, EBITDA of Rs.477.8cr at an EBITDA margin of 16.4% and PAT of Rs.219.6cr. We estimate FY28E EPS at Rs.15.5, and assign a PE multiple of 44x, arriving at a target price of Rs.677 (upside ~88.0%) from the current market price of Rs.360. We maintain our BUY Rating for VIP Industries Ltd over an investment horizon of 30-36 months

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