Broker’s call: VIP Industries (Buy)

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Target: ₹592

CMP: ₹490.90

We recently met the senior management of VIP industries to understand demand trends and various initiatives taken to lift business performance including new product launches.

Management alluded subdued Apr/May led by heatwave impacting travel and lower wedding dates it saw encouraging trends in Jul/Aug. With an attempt for ‘honest pricing’, though E-com channel continue to drive growth, the channel discounting has come down as VIP is strengthening its presence on Amazon.

Management confirmed post Q2FY25 it expects meaningful recovery on the back of, prioritising lightweight and sustainable design innovation, adding 50 EBOs for Carlton franchise to drive premiumisation, strengthening supply chain, focus on high growth backpack/handbag segment and big wedding occasions.

The company has hired BCG for improving supply chain efficiencies. However Bangladesh operation remain stable now. With lower RM price and cost optimisation measures VIP expects gross margin to reach about 55 per cent, yet rising sales from tech enabled luxury offering to lift EBITDA margins to about 15 per cent exit FY25. We introduce FY27 and maintain Buy rating with revised TP of ₹592 (implying 35x Avg.FY26E/FY27 EPS).