Brokerage house Nuvama has downgraded VIP Industries to a ‘Reduce’ with a revised target price of Rs 312/share. Their earlier price target was higher at Rs 454 per share. This downgrade is primarily on the back of the slower business turnaround forces despite the correction in the stock prices. The company clocked slower-than-expected gross margin improvement and guided moderated growth in FY26.
Nuvama on VIP Industries: Margin the big worry
Inventory overhang has been a key concern for three quarters. VIP’s gross margin came in at 46.5%, contracting 930 bps YoY. This was because of the liquidation of soft luggage inventory at reduced margins, lower realisation owing to a change in the Brand & Channel mix and reduced capacity utilisation in Bangladesh. All of these affected profit for the company.
The Management aims to clear the soft luggage inventory by Q1FY26, and expects gross margin to inch up to 52–53% levels next year, driven by turnaround initiatives as well as a pickup in the soft-uprights production in Bangladesh.”
Nuvama on VIP Industries: Hard luggage business continues to dominate
Nuvama reiterated how hard luggage continues to outpace soft luggage for VIP, “reflecting changing consumer trends, with a share of 63% Vs 56% in Q3FY24. That said, the revenue share of the company’s premium and mass premium segments—including brands such as VIP, Skybags and Carlton—decreased to 54% from 56% in Q3FY24.”
According to them, sales in e-commerce channel continued to be strong, increasing share to 23%. “VIP has been focussing on growing Institutional channel sales, whose share rose to 13% versus 10% in Q3FY24. Carlton is the fastest growing brand in Q3. VIP plans to open 25 Carlton stores over next 6 months,” Nivama added.
Also ReadVIP Industries shares in focus as Vijay Kedia acquires stake through block deals VIP Industries: Vijay Kedia connection
The VIP stock was in focus significantly since last September after data indicated that Vijay Kedia’s firm Kedia Securities has acquired a stake in the company through block deals.
Kedia however took to social media to caution investors about the valuation of the stock and said it is quite expensive-
https://twitter.com/VijayKedia1/status/1838414856212328762
VIP: Shareholding pattern
A current analysis of the VIP shareholding pattern as of December 2024 indicates that Mutual Funds own 9.79% stake in the company.
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