Buy VIP Industries Ltd for target price of Rs. 250

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Pee Vee
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Buy VIP Industries Ltd for target price of Rs. 250

Postby Pee Vee » Tue Jun 27, 2017 11:52 am

GEPL research report on VIP Industries for target price of Rs. 250

VIP Industries Ltd is the leading manufacturer of baggage and utilities. The company has best
selling brands like VIP, Alfa, Aristocrat, Skybags, Caprese etc. which constitutes customers from
all the age groups and covering all the segments. VIP has largest market share (more than 50%)
in domestic market These brands also have enough market shares to attain the consistent
growth in the top line. VIP industries in 2004 acquire Carlton brand, manufacturing facilities and
designing to be a one of the leading brand in the world. This business has presence in 65
countries across the globe and has office at London, Dubai, and Hong Kong.

Investment Rationale

Strong product portfolio and strong brand value gives edge

VIP has strong diversified brand and portfolio which caters to almost all the segment. The
company has VIP brand which caters to high end customers based and has Teflon coated anti
stain and water resistant bags to the lightest bag in the VIP Portfolio. VIP’s lightest range of
bags starts from 1.9kgs and is the lightest ever in the portfolio. This range was designed for the
new age traveler, keeping in mind the modern airline luggage restrictions while setting a new
benchmark in the luggage industry. Aristocrat brand is having soft as well as hard luggage. The
brand also is into trademark suitcases and briefcases. Skybags caters youth segment which also
has strong growth potentials. They are first Indian brands to manufacture printed polycarbonate
luggage. Carlton is a tribute to this young, passionate breed of business people. They also hold
larger business from European region. Alfa is made for the consumers. The company also having
ladies handbag segment and also hold the strong market share.

Robust Business Structure

A VIP industry is the largest player of the luggage segment in the domestic markets with a
market share of 58% in the domestic market. The company has also come up with the multiple
brands to attract different customers from various age groups and various segments. The
tourism industry is also growing rapidly in India which will benefit the organization to get higher
growth. Strong brand value and large distribution network help VIP to penetrate the domestic
market across the geographies. VIP has more than 10000 touch points and more than 700 VIP
outlets. This help to increase customer reach of the retail segment and help to maintain the
leading market share in the competitive environment. The company also spending 5%-6% of the
net sales to the advertisement to the increase the visibility of the products. We believe that the
company also has strong advantage after the GST implementation as pricing gap between
unorganized and organized sector will narrow. This will make organized sector’s pricing very
attractive.

Valuation

At the CMP of `196 VIP Industries Ltd. (VIP) is trading at 33.2x, and 29.0 x its FY17, and FY18E
EPS of `5.9 and `6.8 respectively. Compared to its peers; VIP at a discount P/E multiple,
although its margins are better than or comparable to peers. We initiate coverage on VIP with a
BUY rating and attach a multiple of 32.5 xs to VIP’s FY19E earnings (EPS) to arrive at the target
price of `250, indicating a potential upside of 28%.

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