VIP Industries Shares Jump 20% On Analyst Upgrades After Q1 Results

A traveler rides an escalator with a suitcase. (Photographer: Bing Guan/Bloomberg)

VIP Industries Shares Jump 20% On Analyst Upgrades After Q1 Results

Shares of VIP Industries Ltd. posted their biggest single-day jump in 17 months as analysts upgraded the luggage stock expecting a gradual recovery in travel demand and on improving gross margin aided by cost cuts, lower discounts and price hikes.

The company reported a net profit of Rs 2.53 crore in the quarter ended June compared with a loss of Rs 3.78 crore in the preceding three months, according to its exchange filing.

April-June Quarter FY22 Results (Consolidated, QoQ)

  • Revenue at Rs 206.21 crore vs Rs 243 crore.

  • Total costs at Rs 218.73 crore against Rs 265.02 crore.

  • Other income at Rs 14.37 crore compared with Rs 16.30 crore.

Shares of VIP Industries jumped as much as 19.22% but pared some of the gains to trade 17% higher around noon on Thursday. That’s the most since March 13, 2020.

Of the eight analysts tracking the company, seven have a ‘buy’ and one suggests a ‘sell’, according to Bloomberg data. The overall 12-month consensus price target implies an upside of 5.1%.

Here’s what brokerages have to say about VIP Industries’ June-quarter results...

Prabhudas Lilladher

  • Upgrades to ‘buy’ from ‘under-review’, with a target price of Rs 457, an upside of 18%.

  • Better product mix, lower discounts and price hikes aided gross margins.

  • Better-than-anticipated demand recovery post second wave a positive development.

  • 33% of the planned new product launches will be from value/mass category where demand is expected to be strong in the near to medium term.

IDBI Capital

  • Upgrades to ‘buy’ from ‘hold’, with the target price raised to Rs 457, a potential upside of 18%.

  • Sustainable cost cutting initiatives aided the performance, gross margin improvement commendable and is likely to enhance profitability as travel and tourism resume gradually.

  • Bangladesh plant is likely to contribute significantly to its Indian raw material requirements as sales normalise.

  • Company aims to manufacture handbags at Bangladesh plant, none of the competitors have captive procurement of soft luggage, which places VIP Industries at an advantage.

  • Remains structurally positive on the growth prospects of luggage industry.

Edelweiss

  • Upgrades to ‘buy’ from ‘hold’, with target price increased to Rs 486, a potential upside of 25.97%.

  • Lower discount, price increases aided improvement in gross margin.

  • Revival in demand led by vaccination likely to aid sales growth.

  • Company’s efforts to improve operational efficiencies across supply chains to help in managing demand recovery better.

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