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IDBI Capital Report
VIP Industries Ltd.'s Q1 FY24 sales and Ebitda were below with our expectations. Net sales increased only by 7.7% YoY to Rs 6.4 billion (lower by 7.9% of our estimates) as wedding spends during the quarter were subdued.
Gross margin contracted by only 46 basis points YoY to 49.5%. However, Ebitda margin contracted 470 bps YoY to 12.6% due to adverse product mix, higher advertising spends and logistical issues (at Bangladesh plant). Ebitda fell 21.5% YoY to Rs 806 million.
We lower our FY24/FY25 sales by 4% each and lower our Ebitda estimates by 11% each.
Losing market share to other players remains key concern for VIP Industries.
We now value the stock at a price-to-earning of 40 times (earlier 45 times) FY25 to derive a target price of Rs 648 (earlier Rs 836) and downgrade the stock to a 'Hold'.
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