Hold V.I.P. Industries; target of Rs 472: Prabhudas Lilladher
Prabhudas Lilladher’s research report on V.I.P. Industries
We cut our EPS estimates by 5%/7% for FY21E/FY22E and downgrade the stock from BUY to HOLD as 1) VIP has ceded market share due to rising competitive intensity 2) growth concerns can aggravate further if there is an extended factory shut down in China due to Coronavirus mayhem as only 60% of the requirements for 1QFY21 (strongest quarter) are currently hedged by placing advance orders and 3) extended slowdown in discretionary spending amid weak environment has structurally de-railed the growth momentum. Despite near term growth headwinds, margin performance has been commendable (Gross margin/Ind-AS adjusted EBITDA margin expanded by 560bps/290bps respectively) due to superior product mix, stable rupee and benign raw material prices. While we believe the long term story of premiumisation remains intact valuations at 35x FY21E may appear pricey given emanating growth challenges.
We thus downgrade the stock to HOLD (earlier BUY) and revise our TP to Rs472 (Rs501 earlier) effectively valuing it at 32x Sep21 EPS estimates.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Exclusive offer: Use code “BUDGET2020” and get Moneycontrol Pro’s Subscription for as little as Rs 333/- for the first year.