- 28 Jul 2022
- ICICIdirect Research
Disruption free quarter drives strong revenue traction in peak seasonVIPIND - 578 Change: 7.75 (1.36 %)
News: In the first non-disruptive holiday season (the most critical quarter), revenue recovery rate for VIP surpassed pre-covid levels in Q1FY23 (105% of pre-covid levels). On a favourable base, revenue grew by 186% YoY to Rs 590.6 crore (I-direct estimate: Rs 600 crore). Volumes were higher by ~8% over pre-covid levels, whereas average realisations were lower owing to shift in product mix towards value segment (35% currently vs. 25% in Q1FY20). Despite increase in overall proportion of own manufacturing (64% currently vs. 35% in Q1FY20), higher input material prices capped gross margin expansion. EBITDA margins for the quarter stood at 17.4% (up 1100 bps YoY, Q1FY20: 22.2%). Absolute EBITDA came in at Rs 102.6 crore (Q1FY22: Rs 12.9 crore, Q1FY20: Rs 125 crore). Company reported exceptional income worth Rs 15 crore pertaining to partial receipt of insurance claim. Subsequently, PAT for the quarter stood at Rs 69.1 crore (adjusted PAT at a 15 quarter high).
Views: Higher push towards domestic and international travel and recovery airline traffic (~93% of pre-covid levels) has perked up demand for luggage during Q1FY23 which historically has been the strongest quarter for VIP Industries. Higher RM inflation (~24% YoY) restricted gross margins to 50% vs. steady state margin of ~55%. This resulted in EBITDA coming in below our estimates. EBITDA was also impacted by exchange rate fluctuations (~200 bps). While crude based RM have witnessed softness in recent times, the situation continues to be volatile. We expect demand recovery to sustain in the upcoming quarters led by new product launches in backpacks (127 new launches) & luggage (38), opening of schools and pick-up in travel & tourism. Demand recovery continues to be more pronounced towards the mass category than the premium category which is also fuelled by market share gains from unorganised players. Company has embarked capex worth Rs 50 crore to further strengthen its own manufacturing facility in India and Bangladesh.