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IDBI Capital Report
VIP Industries Ltd.'s Q2 FY24 profitability was below with our expectations. Net sales increased only by 6.1% YoY to Rs 5.4 billion (lower by 5.3% of our estimates).
Despite volume growth of 10% YoY, sales grew only 6% YoY to Rs 5.5 billion, indicating pricing pressure. Gross margin recovered by 600 basis points QoQ to 55.5%. However, Ebitda margin contracted 422 basis points YoY to 9.7% (significantly below our estimate) due to higher freight cost and advertising spends.
Ebitda fell 26.1% YoY to Rs 529 million. We lower our FY24/FY25 sales by 4% each and lower our Ebitda estimates by 4% each.
Losing market share to other players remains key concern for VIP Industries.
We now value the stock at a price-to-earning of 38 times (earlier 40 times) FY25 to derive a target price of Rs 612 (earlier Rs 648) and maintain our 'Hold' rating on the stock.
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