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Prabhudas Lilladher Report
VIP Industries Ltd.'s profit after tax was 7%/14% above our/street estimates signifying that demand recovery is significantly better than expectations. In fact, profit after tax was only 2% lower than comparable pre-Covid-19 quarter indicating the company is almost out of pandemic stress.
VIP Industries has plans to expand own manufacturing capacity (Rs 360 million invested so far) which is likely to reduce reliance on external outsourcing.
Post expansion, share of own manufacturing is likely to increase to ~65-70% as compared to ~40% earlier.
Consequently, share of imports is likely to decline to less than 10% in coming years which will not only eliminate currency volatility but also reduce freight cost resulting in margin expansion.
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