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Highlights from the Quarter (Q2FY25):

VIP Industries Ltd (VIPIL) reported a marginally weak quarterly net revenue of Rs.546.9cr for Q2FY25, marginally lower by 0.3% YoY and considerably lower by 14.6% on a QoQ basis. The company reported an EBITDA of Rs.0.5cr for the quarter vs Rs.55.5cr for the same quarter in the previous year, and Rs.51.4cr in the preceding quarter. Subsequently, the company posted a net loss of Rs.33cr for the quarter. The EBITDA Margin pressure observed with a year-on-year dip of 1000 basis points, is attributed to brand and channel mix, as well as inventory reduction and lower production in Bangladesh. The company has been focusing on soft luggage liquidation, and aims to reduce their inventory level to Rs.500cr from Rs.700cr currently. Despite certain setbacks, the management firmly believes margins and profitability will increase in the second half of this financial year, due to their focus on premiumisation, brand mix, and cost optimization initiatives. Regarding individual brands, VIPIL is slowly shifting focus to their VIP brand from Aristocrat. This is because the gross margin difference is tremendous between the two brands, especially in the offline channel. Hard luggage continued to be the fastest growing category contributing to over 60% of the company’s overall revenue. The management expressed confidence in the company’s transformation journey and anticipates improved profitability in the second half of this financial year.

OUTLOOK AND VALUATION

VIP Industries Ltd posted a weak quarter in terms of EBITDA and PAT numbers. However, the management remains confident of improved growth and margins in the second half of the financial year. Therefore, we expect FY26E revenue at Rs.2953.1 cr, EBITDA of Rs.476.2 cr at an EBITDA margin of 16.1% and PAT of Rs.256.7 cr. We estimate FY26E EPS at Rs.18.1, and assign a PE multiple of 41x, maintaining the target price of Rs.741 (upside ~55.8%) from the current market price of Rs.476. We maintain our BUY Rating for VIP Industries Ltd over an investment horizon of 18-24 months.

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