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- 09 May 2023
- ICICIdirect Research
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VIP REPORTS CHALLENGING QUARTER
VIPIND - 470 Change: -4.70 (-0.99 %)News: VIP Industries reported a moderate operational performance in Q4FY23 as the company faced challenges pertaining to major fire at its Bangladesh subsidiary (contributes ~10% of consolidated revenues). On a favourable base, revenue grew 27% YoY to Rs 450.7 crore but was down 14% QoQ (the company’s quarterly revenue run rate was Rs 500+ crore in FY23). On the positive side, the company recorded one of its highest ever gross margins of 57.9% (last six quarter's average: ~50%) mainly owing to softness in crude prices and constant efforts in enhancing share of in-house manufacturing (~70% currently). Hence, despite negative operating leverage, higher gross margins resulted in EBITDA margins improving 40 bps QoQ to 14.3%. Absolute EBITDA declined 12% QoQ to Rs 64.3 crore (up ~2x YoY). The company reported exceptional expense worth Rs 47 crore pertaining to inventory loss owing to fire in subsidiary. Subsequently, it recorded a net loss of Rs 4.3 crore
View: Post two challenging years owing to Covid led disruptions, VIP recorded healthy sales in FY23 with revenues crossing Rs 2000 crore mark for the first time. Higher push towards domestic, international travel and recovery airline traffic had perked up demand for luggage during FY23. Demand recovery continues to be more pronounced towards the mass category than the premium category (share increased from 25% to 38%). To further strengthen its manufacturing capacity, the company has embarked on a Rs 200 crore capex plan to enhance its capacity in FY24E (~Rs 100 crore incurred in FY23). The company continues to have a healthy balance sheet with net debt/equity ratio comfortably placed at 0.28x
Impact: Neutral