Indian Luggage Industry - Sector Report "Bagging the growth story"
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Indian Luggage Industry
Sector Report
“Bagging the growth story”
27 JAN 2020
27 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Investment Summary Sector: Consumer Discretionary
Organized luggage industry with multiple growth drivers: While, global luggage industry is estimated to report 5.3% growth over FY13-22E; the
Indian luggage industry is estimated to grow at double the rate of the global luggage market over the same period. Within the Indian luggage market,
the organised sector with a size of Rs. 3,000crore is expected to lead growth over unorganized players given that competitive landscape has tilted in
favour of organized players (with a share of 40%) versus unorganized (60%) share owing to factors like 1) sustained air passenger traffic growth 15%
CAGR over FY18-24E; 2) 12% CAGR growth in outbound tourism over CY13-19E; 3) favourable demographics – rising millennials (working age)
population, higher number of wedding days over 2020-2022E; 4) rising disposable income which translates into higher discretionary spending in turn
leading to a preference for branded products by this burgeoning middle income group; and 5) GST implementation. Further, millennials aspiration for
travel (short haul and long haul) driven by social media influence, adventure seeking, and eye for experience too will entail huge opportunity for the
Indian Luggage players like VIP Industries and Safari Industries the leading brands in organized space over the medium to long term.
Bagging the growth story now! Luggage market has remained an oligopolistic market world over and India is no different. Given the multiple structural
macro drivers and favourable growth prospects for luggage players, we initiate coverage on the two listed players VIP Industries and Safari Industries
with a BUY rating from a 12-18 month perspective.
VIP Industries: A ‘VIP’ in the portfolio: ‘BUY’ with Target Price of Rs. 554 valuing at 28x FY22E
VIP IN is the leader in the organised and oligopolistic Indian luggage market and will continue to maintain its numero uno position owing to a strong
brand pull, widespread product offerings, deeply entrenched distribution network (~11,000 touch points), debt free balance sheet and strong cash
generation
We estimate the company to report Revenue/PAT CAGR of 12%/24% over FY19-22E aided by growth across its brands viz. Skybags, VIP, Caprese
and Carlton over the next couple years
Scaling up of Bangladesh operations, strong bargaining power with Chinese vendors for sourcing soft luggage and efficient inventory management
will lead to improved working capital efficiency and also EBITDA Margin expansion of o+300bps to 15.6% by FY22E over FY19
We thus believe its premium valuation is justified given its leadership position and balance sheet strength.
227 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Bags & Luggage a Global perspective Sector: Consumer Discretionary
Global Bags & Luggage Market growth to be ~4.5% CY18-23E …handbags dominating with 40% market share
200
2.7% CAGR Crossbody Bags
Others
10%
25%
150
US$ bn
Backpacks
10%
100
50 Luggage
15%
Handbags
0 40%
2013 2014 2015 2016 2017 2018 2023E
…some leading players in global bags & luggage market Global bags & luggage industry over the long term is
expected to report steady mid single digit growth owing to
Global Air Pax traffic growing at 4.3% CAGR over 2018-23E
World is expected to see 1.6 billion arrivals with an average
US$ 1,028 spent per trip by 2022
Millennials to drive higher spends on leisure travel (55% plan to
increase their travel vis-a-vis last year)
Rising disposable income
Relaxation in dress codes driving need for stylish bags &
luggage that suit the wardrobe
Source: Industry Reports, Company, Axis Securities
327 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Global Luggage & Backpack market growth dynamics Sector: Consumer Discretionary
Modest growth in global luggage market owing to volume pressure Global Luggage market growth to be dominated by India and China
30 leading Asia Pacific to grow fastest against other regions
7%
25 5.9%
6% 5.5%
20
5% 4.4%
US $ bn
15 4%
10 3%
2.0%
2%
5
1%
0
0%
2017 2018 2019 2020E 2021E 2022E 2023E
North America Europe Latin America Asia Pacific
Global Luggage market expected to grow to $ 27.1bn Global Backpack market estimated to report 5.5% CAGR to
@ 5.2% CAGR over 2018-23E led by $22.5bn over 2017-23E
Asia Pacific growing at 5.9% CAGR over 2018-23E
25
Within Asia Pacific, India & China to drive growth led by
o Favourable demographics (China & India together have 76% of
total millennial population) 20
o Growing middle class and rising per capita income
15
US $ bn
o Development of tourism both inbound and outbound
o Rising urbanization and nuclearisation of families
10
Global backpack segment to grow fastest at 5.5% CAGR
to US$ 22.5bn over 2018-23E led by 5
Convenience – easy to carry, lightweight
Increasing trend of short duration trips 0
Growing mobility of consumers 2017 2018 2023E
Source: Industry Reports, Samsonite Annual Reports, Axis Securities
427 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Bags & Luggage Market an Indian perspective Sector: Consumer Discretionary
Expected to sustain mid double digit growth momentum aided by ...luggage dominating with 47% market share, contrary to global
volumes and premiumization market which is dominated by handbags
300
250 Handbags
25% Luggage
200
47%
Rs. bn
150
100
50 Backpacks
9%
0
Business Bags Others
9% 10%
Indian handbags and backpack market which is at a nascent stage Indian bags & luggage market likely to maintain healthy
and is dominated by luggage players growth momentum driven by robust growth in backpacks and
handbags market followed by luggage
Titan
Samsonite LVMH India Travel and Tourism spends in India are expected to report
3%
7% 2%
Wildcraft 7.5% CAGR over 2018-23E in line with past 5 years growth
2% momentum fuelled by -
Hermes India Growing middle class
1%
Hidesign Rise in per capita income
1% Growing number of outbound trips
Kering
(Gucci) 1% Increased participation of women in the workforce
VIP Baggit Encouraging ratio of student enrolment to colleges
Da Milano
10% 0.7% 0.8% Improving 2W penetration
Source: Industry Reports, Axis Securities
527 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Indian Luggage market a perspective Sector: Consumer Discretionary
Indian Luggage market (including unorganised) growth pegged Lowest per capita spend on luggage in India offers immense scope
@ 11.2% CAGR over 2018-24E for growth
35 32
100
30
25
80 25
60 20
US $
15
Rs. bn
15
40 10
4 3
20 5 1.4
0
0 Japan North Europe LATAM China India
2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E
America
Organized luggage market (~40%) has doubled over 2013-18 …with soft Luggage continuing to dominate the Indian
40 Luggage market
35
Soft Luggage
30 70%
25
Rs. bn
20
15
10
Hard Luggage
5 30%
0
2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E
Source: Industry Reports, Axis Securities
627 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Macro economic factors driving underlying market potential Sector: Consumer Discretionary
Indian tourism market to grow at 7.5% CAGR going forward… ...leading to a ~2x rise in air passenger traffic over 2018-24E
400
400
350
300
No. of Passengers in mn
300
250
US $ bn
200 200
150
100 100
173
186
201
220
232
371
247
164
116
380
158
104
135
184
50
98
0 0
...with low air travel penetration in India, air passenger traffic As per capita income rises above US $ 2,000 spending on
expected to continue growth momentum discretionary items increases
4
3,500
Domestic Seats per capita
3.3
2.8 3,000
3
2,500
2 1.7 2,000
In US $
1.0 1,500
1 0.7
0.5 0.4 0.4 1,000
2,529
1,610
1,640
1,762
2,038
2,172
2,338
2,737
2,966
3,210
2,014
0.1
0 500
0
Source: IMF, IBEF, FICCI, Axis Securities
727 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Macro economic factors driving underlying market potential Sector: Consumer Discretionary
...as middle income group moves up the income pyramid …domestic tourist visits to rise at 9% CAGR by 2023E
293 M 386 M 13%
14% 12%
12%
High High 12%
8M (3%) $40,000 9%
29M (7%) 9%
10%
Upper Mid Upper Mid 8% 10%
61M (21%) $8,500 – 40,000 9%
168M (44%) 6%
7% 4% 7%
4% 6%
Lower Mid $4,000 – 8,500 Lower Mid
97M (33%) 2%
132M (34%) 2%
0%
Low27 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Resurgence in travel market driven by macro factors Sector: Consumer Discretionary
As per Travel Millennial Survey 2017 Millennials form 34% of India’s population who are primary
wage earners
India, with 34% millennial population has the highest
40%
proportion of millennials compared to other economies
By 2020, Indian will have ~410 millennials with 30%
~US $ 330 billion annual spending capability
62% of millennial go on vacation between 2-5 times a year. 20%
Further, 10% travel about 6 -10 times a year 34% 33% 31%
26%
Most millennials also prefer to explore international locations 10%
14%
over domestic destinations
0%
A burgeoning middle class (largely from Tier II / III cities) India Brazil China USA UK
with majority of it characterised by millennials who are
likely to drive average spending by an Indian traveller as Railway passenger growth to sustain FY18 momentum
against current spends of : 8,600
US$ 857 per trip per person spend on short haul trips
No. of Passengers in Mn
US$ 1,687 per trip per person spend on long haul trips 8,400
Perceptual shift in Tier II & Tier III cities towards luggage
being a ‘fashion statement’ than a utilitarian product 8,200
Railway passenger traffic’s 2018 growth momentum to
8,000
8,397
8,107
8,116
8,286
8,313
8,450
8,550
8,224
continue going ahead led by improved rail travel services
7,800
Source: Media Reports, CAPA, IRCTC RHP, Axis Securities
927 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Rise in Travel & Tourism spends propels demand for luggage Sector: Consumer Discretionary
As per WTTC, India is expected to rank 5th in terms of Robust 25% CAGR over 2013-18 witnessed in Leisure Travel spends
total tourism spending in CY2019 with tourism spending of 250 120
8.3% of GDP expected in CY2019E from 8% in 2013 200 90
60
India’s tourism spends grew at 7.8% CAGR over CY2013-
US $ bn
150
30
19E and expected to continue, driven by 100
0 %
Rising disposable income (31% people willing to spend over 50 -30
Rs. 50,000 per trip as per industry surveys)
0 -60
Peer pressure, Social media influence FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
Improved affordability and availability of air & rail travel
Business Spends Leisure Spends
Govt. initiatives to promote tourism
Business Spending YoY Growth (%) Leisure Spending YoY Growth (%)
90% spends are accounted by domestic tourism primarily
towards leisure travel while outbound spending forms the Outbound tourism spends grew at healthy 12% CAGR over 2013-19E
balance 10% of tourism spends in India 16 8.4%
8.3% 8.3%
14
Outbound tourism are expected to report a healthy 12% 8.3%
12 8.2%
compounded growth over CY2013-19E. Currently ~44% 8.1% 8.2%
10
trips are only leisure travel. By CY2025E, only leisure
8 8.1%
travel departures likely to be 13.9mn (2016 total
Rs. Trn
8.1%
6
departures were 21.9 million)
8.1% 8.0% %
4 8.0%
7.9%
As per UNWTO by CY2020E, ~50 million outbound 2
tourists from India are expected to travel (25mn in 2018) 0 7.8%
2013 2014 2015 2016 2017 2018 2019E
Indian National Departures are expected to report a
growth of 9.6% over FY18-23E Outbound Tourism spends Domestic Tourism spends
Total Tourism spending as % of GDP
Source: World Travel & Tourism, Yatra Survey 2017, CAPA Report, IRCTC RHP, Industry Reports, Company, Axis Securities
1027 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Changing trends in gifting habits and celebrations Sector: Consumer Discretionary27 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Backpacks outpacing luggage industry growth... Sector: Consumer Discretionary
Indian backpack market growth ahead of luggage market …as replacement cycle of backpacks is shorter than luggage
16 16 Backpacks life cycle Luggage life cycle
12 12
8 8
4 Year 2 Year 10 Year 5 Year
4 4
0 0
2013 2014 2015 2016 2017 2018
Earlier Now Earlier Now
Backpacks Value Growth (%) Luggage Value Growth (%)
Backpacks Vols Growth (%) Luggage Vols Growth (%)
...rise in number of student enrolment in colleges ...steadily growing IT-BPM employees (direct & indirect)
40 20
16
30
Students in million
12
In mn
20
8
10
4
0 0
2012 2013 2014 2015 2016 2017 2018 2019 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
Source: Industry Reports, AISHE Report – HRD Ministry, NASSCOM, Company, Axis Securities
1227 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Indian Luggage Industry Segmentation Sector: Consumer Discretionary
Premium
Customer is willing to pay a significant percentage premium on brand,
Samsonite, Carlton
ASP:> Rs 7,000 quality, shopping experience and aspiration
Economy and Mid-level
Skybags, VIP, American Tourister,
Safari, Aristocrat Customer is willing to pay a moderate percentage premium on brand,
ASP: Rs 5,000 – Rs 7,000 quality and shopping experience
Mass
Alfa, Aristocrat, Safari, Kamiliant, Magnum
Customer is willing to pay a moderate percentage premium on quality
ASP:27 JAN 2020 Sector Report
Indian Bags & Luggage Industry
GST led demand shift to organized players Sector: Consumer Discretionary
GST led gains significant for organized players which reported Management commentary on opportunity post GST and implication
20%+ revenue growth for organized players in India
Acceleration observed in market share gains of organized VIP IN: Aristocrat brand (mass offering of VIP) has grown by
players esp in mass segment with Safari Industries being ~79% in FY18. Aristocrat is an affordable brand and
the biggest beneficiary therefore remains a preference to consumers at the time of
subdued spending
Reduced pricing gap with organized players
SAFARI IN: With GST, industry will be fuelled with better
Organized players revenues have seen ~20-25% rise in
growth opportunities and Safari will look to gain on in
sales on annual basis since GST implementation backpacks and PC product categories as consumers will
upgrade from unbranded to branded players
Positioning of players in Indian Luggage Industry
SAMSONITE: Launched Kamiliant in 2016. Within 18
Price- Approx. Price Competitive
Peer Positioning months of launch garnered Rs. 100crore revenue and was
Value Point Intensity
Samsonite market targeted at the unbranded segment in smaller towns and
Premium >Rs. 8,000 Moderate
leader cities
Economy Rs. 4,000 – VIP market Tax Incidence Prior to & Post GST
Moderate
/ Value 6,000 leader
Tax Rate
High; max shift
from unorganized Safari has
Mass27 JAN 2020 Sector Report
Indian Bags & Luggage Industry
Porter’s Five Force Model Sector: Consumer Discretionary
Entry Barriers: High
Buyers’ Bargaining Power: Low
Inventory management a challenge
Luggage a lifestyle product now
Ensure timely product availability
against its utilitarian tag
Multiplicity and bulky nature of SKUs
Multiple SKUs /brands across the
Multiple sales channels and fast
price-value chain significantly lowers
changing fashion trends
buyers ability to drive prices
Sourcing from China a tough task for
Substitution Threat : Low small/new player
Utility value of luggage/bag is cannot
be substitute by any other good
Luggage/ bag a mandatory
accompaniment during travel
Competitive Intensity: High
Suppliers’ Bargaining Power:High
Largely from organized players
Massive scale of Chinese operations
Huge market size where organized makes China sourcing a tough task for
players share is ~25% in overall new/small scale player
market China a soft luggage manufacturing hub
Post GST, unorganized players globally. However, tariff wars has led to
competitiveness is sharply lowered reducing the suppliers bargaining power
15Company Section
27 JAN 2020 Company Report
BUY
Target Price: 554
CMP : 464
Potential Upside : 19%
MARKET DATA
No. of Shares (Cr) : 14.13
Market Cap (Rs Cr) : 6,522
VIP Industries Ltd
Free Float : 46.5%
Avg. daily (6mth) : 1,12,870
52-w High / Low : 525/342
Bloomberg : VIP IN
Sector: Consumer Discretionary
Promoter holding : 53%
FII / DII : 6.7%/9.3%
A “VIP” in the portfolio
Price performance
160
120
80
40
Jul-18 Jan-19 Jul-19 Jan-20
BSE Sensex VIP Ind.
Financial Summary Key Drivers
Y/E Net Sales EBITDA PAT EPS Change P/E RoE RoCE EV/EBITDA Y/E
March (Rs Cr) (Rs Cr) (Rs Cr) (Rs) (%) (x) (%) (%) (x) FY19 FY20E FY21E FY22E
March
FY19 1,785 225 145 10.3 14.6 43.0 25.0% 30.5% 28.1 Revenue Growth 9%
26% 12% 15%
FY20E 1,944 257 181 12.8 24.4 36.3 25.2% 30.4% 25.4
Gross Margin 49.3% 50.5% 50.9% 51.7%
FY21E 2,176 316 224 15.9 24.2 29.2 25.5% 31.1% 20.5
FY22E 2,503 390 279 19.8 24.5 23.5 25.8% 32.0% 16.3 A&SP 5.6% 6.0% 6.1% 6.3%
Source: Company, Axis Securities. CMP as of 24th Jan 2020
Suvarna Joshi – Sr. Manager – Research | suvarna.joshi@axissecurities.in | (+91 22 4267 1740) 1727 JAN 2020 Company Report
VIP Industries Ltd
Investment Rationale Sector: Consumer Discretionary
VIP Industries Ltd (VIP IN) pioneer in the molded lugage was established in 1971, is the leader in the Indian Luggage market with
~46% market share in the organized segment and amongst one of the top 3 luggage manufacturers in Asia. VIP IN manufacturers
both hard luggage and soft luggage that includes a diverse range of Trolleys, Suitcases, Duffle Bags, Backpacks, Executive Cases,
Overnight Travel solutions, School Bags and Handbags. The company has 2 manufacturing facilities at Haridwar and Nasik in India
and captive Bangladesh manufacturing facility was set up in 2004 to reduce dependence on China. VIP IN owns brands like Alfa,
Aristocrat, skybags, VIP, Carlton and Caprese which allows it to offer products for every customer at every price point. Exports form
~4-5% of total revenues as of FY19. Total touchpoints that VIP caters to is ~11,000 with presence across distribution channels like
MBOs, EBOs, CSD, MT/Hypermarket, E-commerce, Institution etc.
We expect Revenues and Earnings to grow at 12% and 24% CAGR respectively over FY19-22E driven by
Strong industry Leader in an Wide-spread Entrenched Captive
tailwinds makes oligopolistic product portfolio distribution Bangladesh
for a compelling Indian Luggage with a Strong network a key factory to help
growth Industry and 2nd brand equity moat VIP has reduce Chinese
opportunity in the largest luggage across price- built for itself dependence and
long term player globally value matrix over the past 40 add to GM
years expansion
We initiate coverage with BUY rating and a target price of Rs. 554 i.e. ~19% (implies ~28x FY 22E earnings)
1827 JAN 2020 Company Report
VIP Industries Ltd
Company Background Sector: Consumer Discretionary
VIP Industries Ltd., incorporated in 1971 pioneered manufacturing of luggage in India. VIP’s Manufacturing Presence
Today it is the leader in backpacks and luggage categories in India and 2nd largest luggage
manufacturer globally
It has two manufacturing facilities in India located at Nasik and Haridwar. It set up a 3rd
Haridwar
manufacturing plant at Bangladesh in FY18 in a step to de-risk its sourcing of soft luggage
from Chinese player
VIP IN has a strong brand equity with VIP its core brand in luggage followed by Skybags, Bangladesh
Carlton, Caprese (handbags), Alfa and Aristocrat
Nasik
Forayed into ladies handbags segment with launch of ‘Caprese’ in 2013 and clocked
Rs. 100 crore revenue in just 5 years from its launch. Strong growth momentum continues
Long term credit rating upgraded one notch to AA/Stable from AA-/Positive by Crisil
recently. While, short term bank faciltiies rating reaffirmed at A1+
FY19 Product wise Revenue Split FY19 Channel wise Revenue Split Q3FY20 Shareholding Pattern
DIIs
CSD FIIs
MT/HyperMarket 9%
Soft 25% 7%
Luggage 30%
72%
Others
31%
Hard
Luggage Promoters
28% General Trade 53%
E-commerce
35%
10%
Source: Company, Axis Securities
1927 JAN 2020 Company Report
VIP Industries Ltd
VIP’s successful business Evolution Sector: Consumer Discretionary
Launch of Water and Stain
Caprese handbags launched; Skybags brand launched; 2) resistant bags with Teflon;
2) Hybrid PC cases manufacturing Polycarbonate (PC) cases 2) VIP ranked amongst
Incorporated two
commences manufacturing started Top 100 most trusted brands Aura variant launched –
subsidiaries in Bangladesh
by Brand Equity India’s 1st range of
luggage for women
2018 2014 2013 2012 2011 2010 2009
Bangladesh plant Printed PC cases VIP Superlite variant Merger of Aristocrat
set up manufacturing started launched Luggage Ltd with VIPIL
Acquired Carlton
Entered into Moulded
brand globally
Furniture Business (no BP Ergo features
longer in this business) launched Delsey - Joint Venture
1971 1981 1986 1992 1996 2000
Haridwar Plant set up; 2)
Brand identity re-vamped ;
3) Enhanced Retail focus
Bangladesh – Joint Venture
1st Manufacturing plant Alfa brand launched;
set up at Nasik 2) Commissioned Nagpur Elanza variant launched
plant
2027 JAN 2020 Company Report
VIP Industries Ltd
Strong industry tailwinds makes for a compelling growth story Sector: Consumer Discretionary
Indian Luggage industry to grow at double the rate of Sustained growth momentum in air travel to aid growth in both hard
global luggage industry over 2018-23E and soft luggage for VIP
120% 20%
Attractive industry dynamics supports robust growth 100%
momentum
24%
15%
30%
24%
32%
28%
27%
26%
35%
80%
Leisure travel spends grew at a CAGR of 25% over FY13-18; 60% 10%
momentum to continue aided by government thrust on promoting 40%
tourism through policy actions 5%
20%
73%
72%
76%
76%
72%
70%
68%
65%
Growing spends on tourism and social media influence, to also 0% 0%
aid healthy 15.6% growth in air passenger traffic over 2018- FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
24E as per FICCI Report 2019
Hard Luggage Soft Luggage Air Passenger Traffic Growth (YoY)
5x growth in annual trips to 1 billion expected by 2040 from
0.2billion annual trips in 2019
VIP revenues grew ahead of Samsonite since FY18
UDAN Yojana of the GoI aims to have 190-200 operational 40% 38%
airports by 2040 opening up plethora of opportunities for surge 30% 29%
in domestic tourist visits 30% 24% 22% 26%
Favourable wedding calendar and increased gifting habits
20% 16%
driven by rise in disposable incomes augurs well for demand of 18%
bags and luggage in India 8% 8%
10%
3% 13%
GST led shift positive for luggage players in organized 0%
space including VIP IN 6% 2%
-5%
-10%
Increased cost of compliance for unorganized players (GST on FY2015 FY2016 FY2017 FY2018 FY2019
luggage now at 18% across industry)
Safari Industries VIP Industries Samsonite*
Post GST price differential has narrowed against unorganized /
unbranded players
Source: Company, Reuters, Axis Securities; Note: * Samsonite revenue is for CY18
2127 JAN 2020 Company Report
VIP Industries Ltd
Leader in an Oligopolistic Indian Luggage Industry Sector: Consumer Discretionary
Globally, luggage market is known to be oligopolistic with Factors leading to oligopolistic nature of industry
top 2-3 players having 85-90% of organized market share Bulky &
Elongated re-
voluminous
In India too, VIP, Samsonite, Safari together account for purchasing cycle
product
90%+ share in the organized luggage industry
Tricky inventory Relatively higher
Despite no manufacturing moat, Luggage market remaines management ticket prices
an oligopolistic market across geographies
Despite competition, VIP has been able to retain market Need for Higher margins
High Entry
leadership given strength of its brands and entrenched relatively larger for channel
Barriers
retail space partners
distribution network with strong brand entailing strongest
economic advantage
Luggage a tourist’s companion, thus aesthetic appeal Despite competition VIP retained its leadership position
alongside functional usage are key purchase decision
making factors. Samsonite
35%
UN Report says by 2030, 40% of India population shall
live in urban areas indicating the steadily growing
urbanization trend.
Growing disposable income, GST implementation, growing Safari Industries
17%
internet penetration will aid demand for branded luggage
aiding organized players like VIP and Safari keeping intact VIP Industries
the oligopolistic structure of the industry as demand for 47% Delsey
1%
organized players goods increases sharply
Source: Company, Axis Securities
2227 JAN 2020 Company Report
VIP Industries Ltd
Widespread product portfolio – Strong Brand Equity Sector: Consumer Discretionary
Luggage (Soft/Hard)
Category Duffel / Duffel Trolley Handbags / Backpacks Brand Ambassador Brand Positioning Target Audience
Trolley/4Wheel
Business
High end
- traveller and
premium brand
Premium affluent families
Rs. 6,000 – 18,000 Rs. 4,000 – 9,000 Rs. 3,500 – 8,000
Lifestyle,
- fashionable Urban women
brand
Rs. 3,800 – 7,500 Rs. 1,000 – 5000
Family
Go to brand
Popular / Mass
travellers
Premium Rs. 3,000 – 10,000 Rs. 1,500 – 4,300 Rs. 1,250 – 4,400
Youth,
Stylish,
adventurous
colourful brand
traveller
Rs. 2,500 – 7,500 Rs. 1,300 – 4,500 Rs. 650 – 4,035
Frequent,
Lower mid
Rohit Sharma aspirational
segment brand
traveller
Mass Premium Rs. 2,200 – 6,100 Rs. 1,250 – 2,430 Rs. 475 – 1,530
Value based Value conscious
- Vijender Singh
brand user
Mass Rs. 1,740 – 2,200 Rs. 800 – 2,150
Source: Company, Axis Securities
2327 JAN 2020 Company Report
VIP Industries Ltd
Strong brands across price-value matrix Sector: Consumer Discretionary
VIP IN products straddle across the price-value matrix Steadily growing A&P spends have created a brand pull helping
and are present in the premium, mid-premium/economy create a strong brand equity
and mass segments with SKUs above1500+ 3,000 6.3% 6.5%
6.1% 5.9%
Premiumization trend aided by growing aspirations 2,500 5.7%
5.5%
leading to improved product mix and steadily improving 2,000 6.0%
1,500
gross margins 5.6%
1,000 5.5%
Market leadership and strong brand equity across price-
1,252
1,416
1,944
2,176
1,785
2,503
500
value matrix allows better pricing power to VIP with
0 5.0%
vendors in the industry as well as customers when FY17 FY18 FY19 FY20E FY21E FY22E
compared to peers
Sales Revenue (Rs. Crore) A&SP (% of Sales)
Across product segments, backpacks as a category and
Aristocrat as a brand have been the fastest growing Brand
% of Launch
Brand Positioning
Revenue Year
amongst VIPs stable of brands
Mid-premium brand; reluanched brand in CY19
Having launched in FY13, Skybags (backpacks and VIP ~40% 1971
backed by A&P despite touch market conditions
soft/hard luggage) today contributes to ~20% of total Alfa >15% 1971
Mass market focused; aids easier shift to branded
products from unbranded luggage
revenues of VIP and continues to be the fastest growing
Acquired UK based Premium International brand
brand in the portfolio. Carlton >10% 2004
with positioning as a business persons brand
Duffel bags remains the smallest segment in the overall Mass market brand to enable shift from
Aristocrat >15% 2007
unbranded to branded bags
bags and luggage market. However, popularity of this
Youth oriented, stylish and functional products. Is
segment is growing owing to functional usage – visit to Skybags ~25% 2012
the fastest growing brand in backpack category
gym, spa, fitness centre etc. Mass Mid Premium brand. Targeted towards
Caprese ~6% 2012 women. Operates in a highly fragmented and
VIP too has presence in duffel bags segment under the competitive market
Skybags brand
Source: Company, Axis Securities
2427 JAN 2020 Company Report
VIP Industries Ltd
Backpacks – low penetration, entails huge growth opportunity Sector: Consumer Discretionary
Backpacks market size is ~ Rs. 3,600-4,000cr category Indian backpack industry strong volume & value growth
growing in high double digits owing to :
15
Shorter replacement cycles ( varying between 6 months to 2
years)
Rising sales of 2W, growing student enrolments, women 10
workforce, need for using different bag for every occasion like
%
tuition bag, sports bag, gym bag etc
Unique positioning of storage + fashionable accessory + 5
functionality
Regularly accompanied on short haul trips which have grown
over the years as millennials like to seek experiences, adventure 0
at time of planning short trips between 2 – 10 days 2013 2014 2015 2016 2017 2018
Backpacks Vols Growth (%) Backpacks Value Growth (%)
Backpacks, a highly fragmented and unorganized category
(unorganized share 65-70%), with low penetration levels. Customer is spoilt for choice given quality offerings from VIP
This opens up a huge growth opportunity for organized
players like VIP who have an entrenched distribution
network and strong brand equity aiding customer up-
gradation
To capitalize on this fast paced growth VIP has 3 brands
viz., – VIP (mid premium), Skybags (mid & mass premium)
and Aristocrat (value segment).
Backpacks is the fastest growing segment in overall
portfolio of VIP Ind.s and has reported >20% CAGR.
Revenues from backpacks stood at ~20% in FY18 and
momentum expected to sustain
Source: Industry Reports, Company, Axis Securities
2527 JAN 2020 Company Report
VIP Industries Ltd
Caprese – a product to capitalize on Handbags segment growth Sector: Consumer Discretionary
Handbags market has a size of Rs 51 billion as of 2018 with a Handbags - fastest growing segment across bags & luggage
20% /17% volume/value CAGR over CY2013-18
industry in India
Over CY2018-23E, Indian Handbags market is estimated to
report a +14.5%/9% volume/value CAGR thus making it the 60,000
fastest growing market
Volumes in '000 units
50,000
VIP marked its entry into this fastest growing segment by 40,000
launching Caprese in 2012 with Alia Bhat as its brand
30,000
ambassador
20,000
Handbags segment is highly fragmented with unorganized
segment forming ~90% of total market. Caprese is amongst the 10,000
top 5 handbags brands in India and competes against players 0
like Lavie, Baggit, Esbeda, Da Milano, Hidesign etc. 2014 2015 2016 2017 2018 2023E
Handbags requires maintaining large number of SKUs and VIP
has been able to efficiently manage
Caprese clocked revenues of Rs. 100 crore in FY18 with a 47% Women workforce participation to aid handbags segment growth
CAGR since its launch in 2012. Caprese contributed ~6% of
27.6%
total revenues aided by significant brand equity (key economic
27.4%
advantage), widespread availability across price points and
channels 27.4%
27.3%
Caprese is a play on rising premiumization trend and enables 27.2%
VIP IN to improve margins as, Caprese along with Carlton has 27.2% 27.1%
highest GMs across VIPs product portfolio. Caprese hand bags
priced between Rs. 750 – 4,000 positioned in the mass mid- 27.0% 27.0% 27.0%
premium segment
Caprese is available in 1000+ touch points across
26.8%
MT/Hypermarket, E-commerce, EBOs. However, distribution in
General Trade (traditional channel) remains work indicating
large headroom for growth 26.6%
2013 2014 2015 2016 2017 2018
Source: Industry Reports, World Bank, Axis Securities
2627 JAN 2020 Company Report
VIP Industries Ltd
Entrenched distribution network a key moat Sector: Consumer Discretionary
As of Dec 2018, VIP Industries has a distribution network of ~11,000 customer touch points across channels
Distribution network comprises of Dealers/Distributors (General Trade – GT), CSD, MT/Hypermarket, EBOs, MBOs, E-commerce
MBOs stand at 986 stores. Revenue contribution from MBOs has now reduced to less than 30% in 2019 versus 100% in 1990
~57% of retail trade touch points are Franchisee run. Going forward focus to be on increasing penetration through franchisee run stores
entailing an asset light distribution model
VIP’s products are widely present across ~1300 Modern Trade stores with 83% availability across ~1100 Hypermarkets which is now
contributing to ~10-12% of total revenues. Hypermarkets to report strong growth as organized brick & mortar retail sector is estimated to
grow at 21-22% CAGR
~10% revenue contribution from E-commerce (available on 67 platforms). Expected to report robust growth and to maintain leadership
B2B (Institutional) channel (gifting, corporate, retail store based offers) is also gaining importance and contributing to healthy
growth of VIP IN
Unparalleled distribution network across ~11,000 touch points Widespread presence of VIP’s brands across channels
Distribution Key touch points Revenue
Channel (Dec 2018) Contribution
General Trade
1,104 35%
(MBOs, Distributors)
Retail Trade (EBOs) 575 25%
Modern Trade 1,327 30%
E-commerce Platforms 67 10%
Source: Company, Axis Securities, Note: RGT – General Trade, RT- – Retail Trade,FR – Franchisee Run, CR – Company Run, MT – Modern Trade, ORS – Organized Retail Store, CSD – Canteen Dept Stores,
EBO – Exclusive Brand Outlet, MBO – Multi Brand Outlets
2727 JAN 2020 Company Report
VIP Industries Ltd
VIPs widespread presence a key economic advantage Sector: Consumer Discretionary
Tactical placement of brands across distribution channels ….with healthy presence across formats
Brand Focused Distribution Channel
CSD
MT/HyperMarket
Gen RT - RT - MT – E- 25%
MT CSD 30%
Trade FR CR ORS comm
Carlton - - - -
VIP
Skybags E-commerce
Aristocrat - - General Trade 10%
35%
Alfa - - - - -
EBOs driving penetration going ahead with focus on asset light Revenues equally spread out across geographies
distribution model
East
70 5 25%
4.1 3.3
60 3.8 3.7 3.8
3.5 3.5 4 West
50
25%
40 3
Rs. crore
30 % South
2
24%
20
1
10
36
37
39
42
47
49
60
0 0 North
FY13 FY14 FY15 FY16 FY17 FY18 FY19 26%
Rent % of Total Revenues
Source: Company, Axis Securities, Note: RGT – General Trade, RT- – Retail Trade, FR – Franchisee Run, CR – Company Run, MT – Modern Trade, ORS – Organized Retail Store, CSD – Canteen Dept Stores, EBO – Exclusive Brand Outlet
2827 JAN 2020 Company Report
VIP Industries Ltd
Drivers of Gross Margins Sector: Consumer Discretionary
Gross Margins (GMs) are a function of – Change in product mix supporting GM expansion
Forex: USD-INR and USD-CNY as VIP imports 50% from China 140% 54%
Brent Crude Prices: Polycarbonate (PC) and Polypropylene are 120% 52%
crude derivatives used in manufacturing hard luggage. Demand
100%
for polycarbonate hard luggage (PC HL) is growing faster than 28% 28% 24%
34% 50%
29% 23%
soft luggage and polypropylene owing to its aesthetic appeal, 80%
colorful and trendy designs, lightweight and durablity 48%
60% 35%
Besides, Aluminium, HDPE, Polyster Nylon, Fabric etc are some 46%
40%
of the other materials that are used in manufacturing of hard
44%
and soft luggage 20%
77% 80% 80% 76% 79% 85% 48%
For VIP, COGS/ Purchase of Stock in Trade stood at 0% 42%
50.7%/84.9% in FY19. Over FY19-22E, we estimate this to FY14 FY15 FY16 FY17 FY18 FY19 H1FY20
reduce as operating leverage kicks in, sourcing from
Bangladesh increased with a favourable mix Raw Material Purchase of Stock-in-Trade Gross Margin
VIP IN GMs have an inverse relation with USD-INR Crude Price and VIP IN GMs have an inverse relationship
75 54% 120 54.0% 55%
69.9 52%
50% 52% 100 51.9%
107.3
70
66.9 70.4 50% 70.9
65.6 80 49.1% 65.5 50%
84.8
USD/Barrel
64.5 59.1
65 49% 48% 60 50.5
60.8 61.3
46% 40 45%
60 49.4 46.0%
46% 45.3% 45.3% 45.5%
45% 45% 46% 44% 20
55 42% 0 40%
FY14 FY15 FY16 FY17 FY18 FY19 H1FY20 FY14 FY15 FY16 FY17 FY18 FY19 H1FY20
USD-INR VIP Gross Margins (%) Avg. Brent Crude Prices VIP Gross Margins (%)
Source: Company, Axis Securities
2927 JAN 2020 Company Report
VIP Industries Ltd
Bangladesh Operations to aid in GM expansion Sector: Consumer Discretionary
Currently ~50% of luggage (soft & hard) requirement is imported Bangladesh Ops. revenues & bottom-line continues the growth path
from China
150
With scale up of Bangladesh operations, VIP would enjoy 129
significant advantages like: 125
Labour cost arbitrage: Bangladesh labour costs are 1/3rd of 100 94
Rs. Cr
Chinese wage rates; a clear cost saving
75
Import Duty benefit: NIL import duty on luggage imported 57
49
from Bangladesh as compared to 15% duty on Chinese 50
imports of luggage; a direct cost benefit
25 17.5
8.3 9.5 9.7
Improved bargaining power with Chinese vendors
0
Over FY19-22E, Bangladesh based procurement to increase to FY17 FY18 FY19 H1FY20
20-25% from current 5% as indicated by management
Rising sourcing from Bangladesh to aid margin improvement VIP’s Gross Margins: better than Safari and inline with Samsonite
55%
51.6%
Bangladesh - own manufacturing 50.5% 50.5% 50.8%
(5%) China - 49.3%
50%
outsourcing
(50%)
India - outsourcing 46.0%
(15%)
45%
India - own manufacturing
(30%) 40%
FY17 FY18 FY19 FY20E FY21E FY22E
Source: Company, Axis Securities
3027 JAN 2020 Company Report
VIP Industries Ltd
Key Managerial Personnel Sector: Consumer Discretionary
Mr. Dilip Piramal Ms. Radhika Piramal Mr. Sudip Ghosh Mr. Anand Daga
Chairman Executive Vice Chairperson Managing Director Head Legal & Company Secretary
• Pioneer of luggage industry • Actively involved in driving • In 2018 was elevated to • Associated with VIP since
in India with over 45 years strategy, innovation and becoming CEO of VIP 2016
of industry experience technology development Industries • Has rich experience of 20+
• Responsible for overall globally for the company • Been with VIP Industries years across companies like
strategy and functioning of • Holds an MBA from Harvard since 2013. Prior to VIP Bharat Forge, Huhtamaki
the company University, graduated from worked with Samsonite India PPL, Atlas Copco etc.
Oxford University for 5 years as South Asia
• Served as MD of VIP Marketing ED
Industries from 2011-2017 • Total experience of nearly
20 years with experience
spanning across consumer
durable companies like
Whirlpool, Bausch & Lomb
etc.
Source: Company, Axis Securities.
3127 JAN 2020 Company Report
VIP Industries Ltd
SWOT Analysis Sector: Consumer Discretionary
Strengths Weaknesses
No. 1 luggage and backpacks brand in India and 2nd largest ~50% dependence on China for procurement of soft
luggage player globally. luggage
~11,000 multi channel touch points across EBOs, MBOs, GT, CSD, Sensitivity to currency movement and RM volatility
Hypermarket/MT, E-commerce, B2B No meaningful offerings in business travel segment
Strong market position with 46% share as of FY19
Debt free balance sheet owing to strong cash generation
in a highly capital intensive business
Huge market size of $3bn (luggage and backpacks),
SWOT Rising competitive intensity amongst organized players
~40% organized and
Increase manufacturing from India and Bangladesh Aggressive peer presence in E-commerce channel
Inorganic acquisition of small scale player in the especially in backpacks
industry Threat of new entrants in price sensitive value segment
Expanding via an asset light franchisee run EBO model
Opportunities Threats
Source: Company, Axis Securities
3227 JAN 2020 Company Report
VIP Industries Ltd
Strong Financial Performance to continue… Sector: Consumer Discretionary
Net Revenue to grow at a CAGR of 19% over FY19-22E Bottom-line has grown consistently
3,000 26.0% 30% 300 60%
15.0% 51%
2,500 12.0% 25% 250 50%
8.9%
2,000 20% 200 40%
2.9% 13.2%
1,500 15% 150 25% 24% 24%
25% 30%
1,000 10% 16%
100 20%
1,416
2,503
1,252
1,944
2,176
1,785
500 5% 50 10%
145
125
181
224
279
83
0 0% 0 0%
FY17 FY18 FY19 FY20E FY21E FY22E FY17 FY18 FY19 FY20E FY21E FY22E
Net Sales ( Rs Cr) % YoY Growth PAT (Rs Cr) YoY Growth (%)
Margins to improve as Bangladesh sourcing increases Consistently delivered healthy return ratios, momentum to sustain
40% 36.1%
20%
31.1% 32.0%
15.6% 30.5% 30.4%
13.2% 14.5% 28.5%
15% 13.7% 30%
12.6%
10.6%
25.6% 25.0% 25.2% 25.5% 25.8%
10% 20%
10.3% 11.1% 20.4%
9.2%
8.8% 8.1%
5% 10%
6.6%
0% 0%
FY17 FY18 FY19 FY20E FY21E FY22E FY17 FY18 FY19 FY20E FY21E FY22E
EBITDA Margin PAT Margin ROE (%) RoCE (%)
Source: Company, Axis Securities.
3327 JAN 2020 Company Report
VIP Industries Ltd
Financial Commentary Sector: Consumer Discretionary
Short term debt to reduce over FY19-22E despite working capital With working capital improvement over FY19-22, Cash from Ops
intensive business to improve
100 0.20 300
0.15
0.15 200
75 0.10x
0.10 100
Rs. crore
Rs. crore
50 0.04x 0.05x
0.04x -
0.02x 0.05
0.00x 0.00x
25 (100)
-
(200)
0 -0.05
FT15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E (300)
FY17 FY18 FY19 FY20E FY21E FY22E
Total Debt D:E (x)
Cash Conversion Cycle set to improve over FY19-22E Inventory days to improve with shift to Bangladesh manufacturing;
Inventory management is a key challenge in the luggage 200 119 140
industry given the 107 112
101 120
Numerous SKUs (>100) 150 92 90
100
Bulky nature of the product
80
No. of Days
Difficulty in forecasting demand 100
No. of Days
60
VIP IN has installed latest ERP software - SAP Hanna and also 50 40
warehouse management system thereby ensuring efficient 20
154
156
137
170
180
144
inventory movement across warehouses and factories 0 0
Over FY19-22, expect inventory days to improve from 170 FY17 FY18 FY19 FY20E FY21E FY22E
days to 137 days by FY22E owing to above measures Inventory Days Debtor Days
Creditor Days Net Working Capital Cycle
Source : Company; Axis Securities Research
3427 JAN 2020 Company Report
VIP Industries Ltd
Outlook & Valuations Sector: Consumer Discretionary
P/E band Valuation
60 We estimate VIP IN to post top-line/bottomline CAGR of
50 12%/24% over FY19-FY22E
40
Expect VIP IN to report EBITDA Margin of ~15.6% by FY22E
30 versus 12.6% in FY19 (+300bps) in an intensely competitive
20 industry aided by improved mix and rising Bangladesh
10 contribution
0
Working capital cycle to improve from 112 days in FY19 to about
Sep-17
Sep-14
Sep-15
Sep-16
Sep-18
Sep-19
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
May-14
May-15
May-16
May-17
May-18
May-19
Jan-20
90-92 days by FY22E
We value VIP IN at 27x FY22E EPS given the healthy growth
PE Mean Mean+1Stdev Mean-1Stdev prospects and arrive at a price target of Rs. 554 (19% Upside)
12mth fwd P/E (x) Risk Factors
1000
Attrition at senior management level
800
600 Aggressive competition from both unorganized and organized
400 players (Safari Ind) to grab market share esp in the economy
200 segment
0 Currency risk is imminent for VIP IN as currently ~50% of soft
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
May-14
May-15
May-16
May-17
May-18
May-19
luggage is imported from China
Sharp RM Price volatility and delay in taking price hikes to hurt
Price 20x 30x 40x 50x
margins (Gross Margin & EBITDA Margin)
3527 JAN 2020 Company Report
VIP Industries Ltd
Peer Comparison Sector: Consumer Discretionary
Safari Industries VIP Industries Samsonite SA Hermes International LVMH Moet Hennessry Christian Dior SE
FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Mcap (USD Bn) 0.2 0.9 3.0 82.5 230.9 89.8
CMP 618 464 18.9 * 708.6 # 431.4 # 473.4 #
Sales Growth (%) 20 18 9 12 -3.4 0.2 14.7 24.8 14.1 23.7 13.6 22.9
PAT Growth (%) 42 33 24 25 -18.9 -8.2 9.5 22.1 5.2 18.0 -56.7 -52.4
ROE (%) 16.1 17.6 25.5 25.8 10.6 11.5 25.1 23.8 21.0 21.1 20.2 20.1
P/E (x) 36.6 27.6 35.8 28.7 17.2 14.9 48.4 43.6 29.5 26.3 28.3 25.8
EV/EBITDA (x) 21.8 16.8 25.1 20.1 9.7 8.9 26.8 24.5 16.7 15.2 9.7 8.9
Source : Company; Axis Securities Research; Thomson Reuters; * CMP in Hong Kong Dollars; # CMP in EURO; CMP as of 24 th Jan 2020
3627 JAN 2020 Company Report
VIP Industries Ltd
Financials (Consolidated) Sector: Consumer Discretionary
Profit & Loss (Rs Cr) Balance Sheet (Rs Cr)
FY18 FY19 FY20E FY21E FY22E FY18 FY19 FY20E FY21E FY22E
Total Net Sales 1,416 1,785 1,944 2,176 2,503 Share Capital 28 28 28 28 28
% Change 13.20% 26.00% 8.90% 12.00% 15.00% Reserves & Surplus 461 553 689 853 1,054
Total Raw material Net Worth 489 581 717 881 1,082
702 904 962 1,071 1,211
Consumption
Total Loan funds 0 86 36 31 26
Staff costs 159 201 224 244 278
Deferred Tax Liability 2 2 2 2 2
Other Expenditure 362 455 501 546 623
Long Term Provisions 9 12 13 14 16
Total Expenditure 1,223 1,560 1,687 1,861 2,112
Other Long Term Liability 0 0 10 11 12
EBITDA 193 225 257 316 390
Capital Employed 501 682 778 939 1,139
% Change 46.1% 16.2% 14.2% 23.0% 23.7%
Gross Block 104 156 191 223 248
EBITDA Margin % 13.7% 12.6% 13.2% 14.5% 15.6%
Less: Depreciation 29 44 64 88 114
Depreciation 12.9 16.6 20.2 23.6 26.2
Net Block 75 112 126 135 134
EBIT 181 208 236 292 364
Investments 19 24 139 188 216
% Change 52.1% 15.3% 13.5% 23.6% 24.7%
Sundry Debtors 177 299 224 251 295
EBIT Margin % 12.7% 11.7% 12.2% 13.4% 14.6%
Cash & Bank Bal 23 14 67 120 217
Interest 0 1 1 1 1
Loans & Advances 4 4 4 4 4
Other Income 9 8 8 9 10
Inventory 317 527 422 455 514
( as % of PBT) 5% 4% 3% 3% 3%
Other Current Assets 68 69 75 84 96
PBT 190 215 243 300 374
Tax Total Current Assets 661 913 792 914 1,127
63 70 63 76 94
Tax Rate % 33.1% 32.4% 25.7% 25.2% 25.2% Curr Liab & Prov 272 389 299 318 359
APAT 127 145 181 224 279 Net Current Assets 389 524 493 596 768
% Change 48.8% 14.6% 24.4% 24.2% 24.5% Total Assets 501 682 778 939 1,139
Source: Company, Axis Securities.
3727 JAN 2020 Company Report
VIP Industries Ltd
Financials (Consolidated) Sector: Consumer Discretionary
Cash Flow (Rs Cr) Ratio Analysis (%)
FY18 FY19 FY20E FY21E FY22E FY18 FY19 FY20E FY21E FY22E
Growth (%)
PBT 190 215 243 300 374
Net Sales 13.2% 26.0% 8.9% 12.0% 15.0%
Depreciation & Amortization 13 17 20 24 26
EBITDA 46.1% 16.2% 14.2% 23.0% 23.7%
Provision for Taxes 0 1 1 1 1 APAT 50.7% 16.0% 24.5% 24.2% 24.5%
Chg in Deferred tax -76 0 0 0 0 Per Share Data (Rs.)
Chg in Working cap 53 -216 -20 -97 -100 Adj. EPS 9.0 10.3 12.8 15.9 19.8
BVPS 34.6 41.1 50.7 62.3 76.6
Diret tax paid -140 -70 -63 -76 -94
DPS 3.0 3.2 3.2 4.3 5.5
Cash flow from operations 40 -53 181 152 207
Profitability (%)
Gross Margin 50.5% 49.3% 50.5% 50.8% 51.6%
Chg in Gross Block -121 -59 -32 -33 -26 EBITDA Margin 13.7% 12.6% 13.2% 14.5% 15.6%
Chg in Investments -143 0 0 0 0 Adj. PAT Margin 8.8% 8.1% 9.3% 10.3% 11.2%
ROCE 36.1% 30.5% 30.4% 31.1% 32.0%
Chg in WIP 161 0 0 0 0
ROE 25.6% 25.0% 25.2% 25.5% 25.8%
Cash flow from investing -102 -59 -32 -33 -26
ROIC 39.3% 32.2% 41.2% 46.1% 51.4%
Valuations (X)
Proceeds / (Repayment) of PER 49.3 43.0 36.3 29.2 23.5
-49 0 0 0 0 P/BV 12.8 10.7 9.1 7.4 6.1
Short Term Borrowings (Net)
EV / EBITDA 32.2 28.1 25.4 20.5 16.3
Repayment of Long Term
0 0 0 0 0 EV / Net Sales 4.4 3.5 3.4 3.0 2.5
Borrowings
Turnover Days
Loans 0 86 -50 -5 -5 Asset Turnover 16.2 13.8 11.2 11.4 11.2
Finance Cost paid -16 -1 -1 -1 -1 Inventory days 156 170 180 144 137
Dividends paid -92 -45 -45 -61 -78 Debtors days 38 49 49 38 37
Creditors days 93 107 110 90 84
Dividend Distribution Tax paid -19 0 0 0 0
Working Capital Days 101 112 119 92 90
Cash flow from financing -175 39 -96 -66 -84 Gearing Ratio
Chg in cash -238 -73 53 53 97 Total Debt to Equity 0.0 0.1 0.05 0.04 0.02
Source: Company, Axis Securities.
3827 JAN 2020 Company Report
VIP Industries Ltd
Disclaimer Sector: Consumer Discretionary
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of
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accurately reflect my/our views about the subject issuer(s) or securities. I/We (Research Analyst) also certify that no part of my/our compensation was, is, or will be directly or indirectly related to
the specific recommendation(s) or view(s) in this report. I/we or my/our relative or ASL does not have any financial interest in the subject company. Also I/we or my/our relative or ASL or its
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Any holding in stock – NO
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3927 JAN 2020 Company Report
VIP Industries Ltd
Disclaimer Sector: Consumer Discretionary
DEFINITION OF RATINGS
Ratings Expected absolute returns over 12-18 months
BUY More than 10%
HOLD Between 10% and -10%
SELL Less than -10%
NOT RATED We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation
UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events
NO STANCE We do not have any forward looking estimates, valuation or recommendation for the stock
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changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Past performance is not necessarily a guide to future performance. Investors are advice necessarily a guide to future performance.
Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements
are not predictions and may be subject to change without notice.
ASL and its affiliated companies, their directors and employees may; (a) from time to time, have long or short position(s) in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other
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lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. Each of these entities functions as a separate, distinct
and independent of each other. The recipient should take this into account before interpreting this document.
ASL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that ASL may have a potential conflict of
interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ASL may have issued other reports
that are inconsistent with and reach different conclusion from the information presented in this report.
Neither this report nor any copy of it may be taken or transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in
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intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to
law, regulation or which would subject ASL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of
investors.
The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The Company reserves the right
to make modifications and alternations to this document as may be required from time to time without any prior notice. The views expressed are those of the analyst(s) and the Company may or may not subscribe to all the views
expressed therein.
Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, Corporate office: Unit No. 2, Phoenix Market City, 15, LBS Road, Near Kamani Junction, Kurla (west), Mumbai-400070, Tel No. – 022- 40508080 / 022 - 61480808, Regd. off.- Axis House, 8th Floor,
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