Please refer to important disclosures at the end of this report 1 VIP Industries Ltd (VIP) is the largest luggage player in India with ~50%+ market share in the organised market. It has been able to create successful sub brands like Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Caprese. We feel that the company is in very sweet spot where it is gaining market share from unorganised players and can grow at 25%+ CAGR for next couple of years. Favourable Industry dynamics for organized players post GST: Indian luggage industry is valued at `10000cr+ and is largely dominated by the unorganized players. The top three branded players - VIP, Samsonite and Safari forms ~30% of this market. Owing to improving economy and increasing travel, the luggage industry has posted a 13%+ CAGR in the past few years and is expected to maintain this momentum for next few years. With GST implementation in 2017, the new cost dynamics has further led to industry shifting towards organized players. Diversified product portfolio and strong sub brands: VIP’s has one of the most diversified luggage offerings. The company’s sub brand like Aristocrat and Alfa cater to the mass segments while the brands like Carlton, Caprese and V.I.P. cater to the mid to premium segment. The company is also targeting the youth through its trendy brand – Skybags which is one of the fastest growing category. Strong brand visibility with wide distribution network: VIP has been able to create strong sub brands by continuously spending ~5-6% percentage of annual revenue on advertising. It has also started using film star celebrities as brand ambassador for creation of strong individual sub brands. Currently, VIP has distribution network of over 10,000+ retail outlets points of sale which has increased from ~8000 points in ~two years. Outlook and Valuation: Backed by robust growth in volume and better brand awareness, we expect VIP to report a CAGR of ~26% and 35% respectively in top line and bottom-line respectively over FY2018-20E. The recent correction has given the investors an opportunity to invest in a market leader with favourable demand dynamics. It is currently trading at a P/E of 29x its FY2020E EPS which looks attractive looking at its leadership position in a growing sector. Hence we initiate coverage on the stock with a Buy recommendation and target price of `555 (35x FY2020E EPS), indicating an upside of ~20% from the current levels. Key financials Y/E March (` cr) FY2016 FY2017 FY2018 FY2019E FY2020E Net Sales 1,216 1,252 1,410 1,804 2,255 % chg 16.1 2.9 12.6 28.0 25.0 Net Profit 66 85 127 179 225 % chg 52.7 28.2 48.8 41.3 25.5 OPM (%) 8.9 10.6 13.7 15.0 15.0 EPS (Rs) 4.7 6.0 9.0 12.7 15.9 P/E (x) 98.2 76.8 51.5 36.5 29.0 P/BV (x) 19.2 16.0 13.3 11.6 9.4 RoE (%) 19.6 20.9 25.9 31.7 32.4 RoCE (%) 26.6 29.1 36.9 45.4 46.6 EV/Sales (x) 5.4 5.2 4.6 3.6 2.9 EV/EBITDA (x) 60.4 48.7 33.3 23.9 19.1 Source: Company, Angel Research, Note: CMP as of November 19, 2018 BUY CMP `462 Target Price `555 Investment Period 12 Months Stock Info Sector Gross Debt (` cr) Nil Bloomberg Code Shareholding Pattern (%) Promoters 53.5 MF / Banks / Indian Fls 28.1 FII / NRIs / OCBs 12.1 Indian Public / Others 13.2 Abs. (%) 3m 1yr 3yr Sensex (6.7) 1.4 38.1 VIP (20.6) 49.4 394.0 Reuters Code VIPI.BO VIP@IN BSE Sensex 35,457 Nifty 10,682 Avg. Daily Volume 24,099 Face Value (`) 2 Beta 1.3 52 Week High / Low 645/287 Luggages Market Cap (` cr) 6,514 3 year daily price chart Source: Company, Angel Research Nidhi Agrawal 022-39357800 Ext: 6872 [email protected]VIP Industries Secular play on consumption and changing lifestyle. Initiating coverage | Luggage November 19, 2018
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Promoters 53.5 MF / Banks / Indian Fls 28web.angelbackoffice.com/research/archives... · The Indian luggage industry is valued at `10000cr+ and is largely dominated by the unorganized
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1
Please refer to important disclosures at the end of this report 1 1
VIP Industries Ltd (VIP) is the largest luggage player in India with ~50%+
market share in the organised market. It has been able to create successful
sub brands like Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Caprese. We
feel that the company is in very sweet spot where it is gaining market share
from unorganised players and can grow at 25%+ CAGR for next couple of
years.
Favourable Industry dynamics for organized players post GST: Indian luggage
industry is valued at `10000cr+ and is largely dominated by the unorganized
players. The top three branded players - VIP, Samsonite and Safari forms
~30% of this market. Owing to improving economy and increasing travel, the
luggage industry has posted a 13%+ CAGR in the past few years and is
expected to maintain this momentum for next few years. With GST
implementation in 2017, the new cost dynamics has further led to industry
shifting towards organized players.
Diversified product portfolio and strong sub brands: VIP’s has one of the most
diversified luggage offerings. The company’s sub brand like Aristocrat and
Alfa cater to the mass segments while the brands like Carlton, Caprese and
V.I.P. cater to the mid to premium segment. The company is also targeting the
youth through its trendy brand – Skybags which is one of the fastest growing
category.
Strong brand visibility with wide distribution network: VIP has been able to
create strong sub brands by continuously spending ~5-6% percentage of
annual revenue on advertising. It has also started using film star celebrities as
brand ambassador for creation of strong individual sub brands. Currently, VIP
has distribution network of over 10,000+ retail outlets points of sale which
has increased from ~8000 points in ~two years.
Outlook and Valuation: Backed by robust growth in volume and better brand
awareness, we expect VIP to report a CAGR of ~26% and 35% respectively in
top line and bottom-line respectively over FY2018-20E. The recent correction
has given the investors an opportunity to invest in a market leader with
favourable demand dynamics. It is currently trading at a P/E of 29x its FY2020E
EPS which looks attractive looking at its leadership position in a growing sector.
Hence we initiate coverage on the stock with a Buy recommendation and target
price of `555 (35x FY2020E EPS), indicating an upside of ~20% from the current
levels.
Key financials
Y/E March (` cr) FY2016 FY2017 FY2018 FY2019E FY2020E
Net Sales 1,216 1,252 1,410 1,804 2,255
% chg 16.1 2.9 12.6 28.0 25.0
Net Profit 66 85 127 179 225
% chg 52.7 28.2 48.8 41.3 25.5
OPM (%) 8.9 10.6 13.7 15.0 15.0
EPS (Rs) 4.7 6.0 9.0 12.7 15.9
P/E (x) 98.2 76.8 51.5 36.5 29.0
P/BV (x) 19.2 16.0 13.3 11.6 9.4
RoE (%) 19.6 20.9 25.9 31.7 32.4
RoCE (%) 26.6 29.1 36.9 45.4 46.6
EV/Sales (x) 5.4 5.2 4.6 3.6 2.9
EV/EBITDA (x) 60.4 48.7 33.3 23.9 19.1
Source: Company, Angel Research, Note: CMP as of November 19, 2018