Target: ₹672
CMP: ₹483.50
The Mumbai-based luggage maker, VIP Industries Ltd (VIP), is India’s largest and world’s second-largest luggage manufacturer. Its brands cater to the mass and premium segments of the demand pyramid, with products across a wide price range.
Founded in 1968, by noted industrialist Dilip Piramal, has over the years nurtured the brand having good brand recall among consumers, amidst competition. Sector tailwinds like rising business and leisure travels, aviation traffic volumes, the advent of premium trains, the proliferation of SUVs/PVs, rising aspirations of GenX families, changing personal preferences, etc., would keep demand at around 10 per cent level over the medium to long term horizon.
The management has said FY25 will be a transformational one in brand positioning and marketing innovations after the organisational changes it made in FY24. We feel tighter working capital management and SKUs rationalisation would hold the key to success, which the management has been quite vocal of late.
The company has been strategising to regain the lost bastion over the years with a renewed vigour after rejigging the mid-level management, with reward-based marketing. With massive sector tailwinds, we believe the company would at least achieve 10 per cent CAGR revenue with margins improving due to premiumisation, rationalisation of manpower, control over Other Expenses on higher logistic costs.
We set a target price of ₹672 with BUY rating which would factor 40x FY26E earnings.
