Anand Rathi Places Buy On Midcap Luggage Stock, Sets 23% Higher Price Target

Broking firm, Anand Rathi has recommended buying the stock of luggage manufacturer VIP Industries. The brokerage has set a higher price target of Rs 750 as against the current market price of Rs 611.

VIP Industries, Maintaining a Buy: Anand Rathi

According to the brokerage firm, in a seasonally strong quarter, VIP Industries is seeing some demand softness due to fewer wedding days (seven, compared to 17-18 a year back) and less leisure travel due to heat across the country (the hotels industry is also saying this).

"For Q1 FY24, we expect ~10% revenue growth y/y with ~14%-15% EBITDA margins (14.3% the prior quarter, 17.3% a year back). Management now expects 15% growth in FY24, compared to 20% guided to. Factoring in the above, we cut our FY24e/FY25e revenue 5%/ 6.6% and earnings 2.6%/4.4%. We maintain our Buy rating, with a new 12-month target price of Rs 750, 34x FY25e EPS," the brokerage has said.

H2 FY24 to be strong

According to Anand Rathi, the company expects a better H2 FY24 since Q3 FY24 has more wedding dates, the festival season and e-commerce sales, which would boost revenue compared to H1 FY24.

"We now expect a 16.5% revenue CAGR, against 20% earlier. The EBITDA margins would expand 440bps in FY25 to 19.5%, from 15.1% in FY23. This expansion would result from favourable raw material prices, the greater focus on in-house manufacturing and efficiency," the brokerage has said.

Other KTAs from the management meet according to Anand Rathi

The mass category continues to do well, followed by the mid-premium category. 2) The company is now discussing e-commerce sales with Amazon. It already has a tie-up with Flipkart. 3) 35 stores opened in Q1 FY24; 800 EBOs planned by FY24 (~80% will be franchisees). 4) Store openings would be more focused in Tier 3 and Tier 4 towns as the idea is to penetrate deeper in those with 30,000+ populations. 5) Planning to open ~100 back-packs and Caprese kiosks in FY24. 6) Capacity increases would be for back-packs and duffle bags. 7) The company is seeing land in the north (Faridabad) and southern India for this.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.