For Q3FY2019, VIP Industries (VIP) posted a strong yoy growth of 27% in revenue to `430 cr mainly led by 30-35% volume growth. This growth was above our expectation of 21%.
Outlook and Valuation: While the growth in volume remains encouraging and is likely to sustain as the company is in sweet spot in a fast growing luggage industry. However, we have cut our margin assumption for next two years in view of competitive pricing pressure. Overall, we have cut our earnings estimates by ~10% for FY2019 and FY2020 and are expecting a CAGR of ~26/29% in revenue/ earnings over FY18-20E. The stock is trading at 33.1x our FY2020 earnings, post recent correction. Looking at the near term margin pressure, we now recommend ACCUMULATE with a target price of `542 (35x rolled over on average of FY2020E and FY2021E EPS).

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