VIP Industries - New Top Team Aiming For A Recovery With A Refreshed Portfolio: Systematix

Systematix Research Report

We attended VIP Industries Ltd.’s analyst meet to understand the new Managing Director’s strategy for the company and also get a preview of the upcoming collections across the portfolio.

The company is looking to arrest its market share decline and aiming for a significant margin improvement as well. Key highlights -

1. Company expects a double-digit revenue growth from Q4 FY24 onwards and targets to grow at 15-20% compound annual growth rate in the medium-term (2-3% ahead of industry growth);

2. VIP Industries expects Skybags, VIP and Carlton to grow at a higher rate (~ 20-25%) compared to Aristocrat (~10%);

3. With an above industry growth rate company aims to see an improvement in market share from H1 FY25 onwards which was fallen to 37% from about 48% in the past five years;

4. Premium portfolio is expected to tap new higher price points, leading to an operating margin expansion to 15% from H2 FY25 which is expected to reach 20% in the next three years;

5. Other margin improvement drivers will be lower warehousing/freight costs and completion of the BCG project in Q4 FY24 and

6. With improved brand spending and promotions, company believes it will reduce the current inventory level from ~Rs 9 billion to ~Rs 6 billion in the coming quarter.

With strong sectoral tailwinds for the luggage space, a fresh and reenergized management team, a refreshed portfolio and an improved supply chain, the company is looking to regain its past glory, but execution remains the key monitorable especially in light of increased competitive intensity in the space.

The stock is currently trading around 26.7 times FY26 consensus earnings.

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