Buy VIP Industries Ltd For Target Rs.677 By Sushil Finance
Highlights from the Quarter (Q1FY26):
* VIP Industries Ltd (VIPIL) reported a net revenue of Rs.566.1cr for Q1FY26, lower by 11.6% YoY, but higher by 13.6% on a QoQ basis. The company reported an EBITDA of Rs.29.2cr for the quarter vs Rs.10.3cr in the preceding quarter. Subsequently, the company posted a net loss of Rs.13.1cr for the quarter. The normalized EBITDA margin, excluding a one-time 5% impact from inventory provision and other expenses, would have been 10.2%.
* The company anticipates a constructive demand outlook, fueled by various travel occasions such as weddings, festivals, and holidays. The company plans to focus on durable products, smart luggage, and e-commerce growth to enhance market share and achieve sustainable development. The VIP brand is venturing into professional backpacks with new lines such as Vogue, Urban, and Legacy. The company is also introducing QR-enabled smart bag tags for select purchases of House of VIP brands to enhance the travel experience.
* The company improved its financial health by reducing inventory from 65 lakh to 38 lakh units. Further, VIPIL has decreased net borrowings by Rs.118cr.
* Improved Bangladesh Operations: The Bangladesh operations reported a profit of Rs.8cr in Q1FY26, a substantial improvement compared to a loss of Rs.11cr in Q1FY25.
* Dilip Piramal and family—including DGP Securities, Kemp & Co, Kiddy Plast, Alcon Finance & Investment, Piramal Vibhuti, etc.—have agreed to sell up to 32% of their shares in VIP Industries, reducing their ownership from ~51.7% to around 19.7%. A consortium led by Multiples Private Equity Fund IV, along with Multiples Gift Fund IV, Samvibhag Securities, and a few individual investors acquired the stake. The bulk stake (32%) is being sold for roughly Rs.1764 cr, at Rs.388 per share.
OUTLOOK AND VALUATION
We expect FY28E revenue at Rs.2914.0cr, EBITDA of Rs.460.1cr at an EBITDA margin of 15.8% and PAT of Rs.223.6cr. We estimate FY28E EPS at Rs.15.7, and assign a PE multiple of 43x, arriving at a target price of Rs.677 (upside ~61.2%) from the current market price of Rs.420. We maintain our BUY Rating for VIP Industries Ltd over an investment horizon of 30-36 months.
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