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Highlights from the Quarter (Q1FY25):

VIP Industries Ltd (VIPIL) reported a stable quarterly net revenue of Rs.641.0 cr for Q1FY25, marginally higher by 0.3% YoY and 23.2% on a QoQ basis. The company reported an EBITDA of Rs.51.4 cr for the quarter vs Rs.83.2 cr for the same quarter in the previous year, and Rs.11.7 cr in the preceding quarter. Subsequently, the company posted a net profit of Rs.4.0 cr for the quarter. The profitability in the quarter was hit primarily due to soft luggage liquidation, channel mix and under-absorption of overheads due to lower production at Bangladesh. Despite certain setbacks, the management firmly believes margins and profitability will increase in the second half of this financial year. Regarding individual brands, the value segment showed further growth. Carlton continued to be successful in its premiumisation agenda, which led to an increase in the Average Selling Price by 16% in the quarter. VIP continued to grow on the back of successful new launches mainly in lightweight and tech-enabled luggage. Hard luggage now continues to be the fastest growing category and as on date, 56% of the overall revenue of the company now is hard luggage. This is keeping with the current trend of shift from soft luggage to hard luggage. Addressing the current political turmoil in Bangladesh, the management assured that VIP’s factories are in the EPZ (Export Processing Zone), which has not been majorly impacted. They further mentioned that in the last 40 days of unrest, the factory was only closed for 3 days.

OUTLOOK AND VALUATION VIP

Industries Ltd posted a weak quarter in terms of EBITDA and PAT numbers. However, these were primarily due to one-time expenses, and 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 ~65.0%) from the current market price of Rs.449. We maintain our BUY Rating for VIP Industries Ltd over an investment horizon of 24-30 months.

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