Gladiator Stocks - VIP Industries : Multi year breakout confirms structural turnaround...

Technical View

The hospitality and travel sector has underperformed over multiple years and now coming out of this hibernation. Within the space, we remain constructive on VIP Industries as it is the best proxy play of the travel theme. The stock has clocked multiyear range breakout (Rs. 650-190) on the back of rising volumes, indicating a structural turnaround that augurs well for acceleration of upward momentum

Key point to highlight during up move since June 2020 is that, on multiple occasions elevated buying demand emerged in the vicinity of 100 days EMA. This highlights inherent strength that augurs well for durability of ongoing up move

On the oscillator front, weekly RSI recorded bullish crossover, thus validating positive bias

Fundamental View

VIP, a market leader in the organised luggage space in India, has a range of leading brands, positioned across the entire price range, catering to value (Aristocrat) mid (VIP, Skybags) and premium (Carlton, Caprese) price points. On the back of the improved travel & tourism scenario in India and improving domestic airline passenger traffic, VIP Industries witnessed a healthy recovery in Q3FY22 with the company reporting its highest revenues in the last eight quarters. Recovery rate was at ~92% in Q3FY22 with improving domestic airline passenger traffic data (85% recovery rate)

We expect VIP to reach pre-Covid levels by FY23E and register mid to high teen revenue growth in FY24E. The company is aspiring to achieve 65-70% of revenue from its India and Bangladesh plant in FY23 (vs. 40% in FY20). The company has significantly curtailed its dependence on finished goods from China to <10% vs. ~50% in FY20. Strong manufacturing capabilities in Bangladesh and India give VIP an edge over its peers who depend mainly on imports

The company has invested ~ Rs. 36 crore in expanding capacity for hard luggage in India and Bangladesh and is planning to launch new product lines in hard luggage. Re-engineered fixed overheads and increased proportion of in-house manufacturing both from India and Bangladesh to translate into better margins, going forward, at 18-18.5% (vs. 17% pre-Covid levels). We maintain a positive view on the stock

For details, click on the link below:

Link to the report

Shares of VIP Industries Limited was last trading in BSE at Rs. 728.40 as compared to the previous close of Rs. 688.80. The total number of shares traded during the day was 66453 in over 3236 trades.

The stock hit an intraday high of Rs. 737.65 and intraday low of 691.20. The net turnover during the day was Rs. 47337314.00.

Source : Equity Bulls

Keywords

VIPIndustries INE054A01027 GladiatorStocks ICICIDirect