vip industries ltd detailed report - rakesh...
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Stock Data
Sector Consumer Durables
Face Value Rs. 10.00
52 wk. High/Low (Rs.) 299.00/41.30
Volume (2 wk. Avg.) 54497
BSE Code 507880
Market Cap (Rs.In mn) 7258.9
Financials (Rs.in.mn) FY10 FY11E FY12E
Net Sales 6362.0 7061.8 7909.2
EBIDTA 958.0 1065.8 1201.5
Net profit 501.0 579.8 666.9
EPS 17.70 20.4 23.5
P/E 14.49 12.52 10.88
VIP Industries Ltd Strong BUY F
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SYNOPSIS
• VIP Industries Limited manufactures and
sells luggage products and accessories in
India and internationally.
• VIP Industries has a 60% market share in
organized market.
• VIP has been able to collaborate with an
Auto maker Mahindra Renault.
• VIP Industries Ltd has recommended a
Final dividend.
• During the year ended, the robust growth of
Net Profit is increased to Rs.501.00 million.
• Operating profit of the company is expected
to grow Rs.1065.87 million and 1201.55
million over 20011E to 2012E respectively.
• Net Sales and Net profit of the company are
expected to grow at a CAGR of 15% and
58% over 2009 to 2012E respectively.
1 Year Comparative Graph
VIP Industries Ltd BSE SENSEX
V.S.R. Sastry
Equity Research Desk
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
C.M.P: Target Price: Rs.256.50 Rs.303.00
Share Holding Pattern
June 03, 2010
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
VIP Industries Ltd 256.50 7258.9 17.70 14.47 3.85 50.00
Nilkamal Ltd 264.50 3388.6 36.96 7.16 1.31 20.00
Whirlpool of India Ltd 263.50 33494.2 11.43 23.05 16.74 0.00
Bajaj Electricals Ltd 206.00 20094.2 15.81 15.81 8.46 100.00
Investment Highlights
Q4 FY10 Results Update
VIP Industries Limited reported Standalone earnings results for the fourth quarter
ended March 31, 2010. The net sales/income for the quarter is decline by 14.11%
to Rs.1391.00 million as against Rs.1619.50 million in the same quarter of the
corresponding year. The net profit for the quarter has decreased to Rs.99.00
million, as against from Rs.131.90 million in the corresponding period of the
financial year. Company EPS for the quarter stood at Rs.3.50 for the quarter ended
March 31, 2010.
Quarterly Results - standalone (Rs in mn)
As At Mar-10 Mar-09 %change
Net sales 1391.00 1619.50 (14.11)
Net Profit 99.00 131.90 (24.94)
Basic EPS 3.50 4.66 (24.94)
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Break up of Expenditure
Recommended dividend
VIP Industries Ltd has recommended a Final dividend of Rs. 3/- per equity share
for the financial year ended March 31, 2010.
Mahindra Renault Logan joint venture with VIP Tourer
VIP has been able to collaborate with an Auto maker. VIP Spice (with I ‐Cocoon) will
be the official bag to be supplied with the new Mahindra Renault Logan Tourer (a
new variant of Mahindra Logan). A set of Spice bags ( 55 + 65 ) and 1 pc of I
cocoon will be given to the consumers along with the car purchase. The bags and
the car will carry the VIP Tourer logo. This is the first time VIP Logo will be visible
on a car. The car interiors have been made keeping in mind the design of the bag.
i.e. the seat covers are in matching brown color. The seat cover pullers are VIP
Branded. The car is being promoted as being developed jointly with VIP. Mahindra
Renault will promote the car in print.
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Expansion plans
VIP Industries plans to open 50-60 showrooms, out of which about 15 showrooms
would be in the eastern region. It’s been a good market for the company and
contributed around 30% to the total sales. This year, it was expected to increase by
about 3-4%. The investment in the flagship stores would be Rs 50 lakh. Currently
there are around 130 flagship stores in the country, out of which 11 are in the
West Bengal and 22 stores in the eastern region.
The luggage major was also looking at spending an approximate amount of Rs 150
million this fiscal on advertising, up from Rs 100 million last fiscal.
Company Profile
VIP Industries (VIPIL), incorporated in 1968, is engaged in the business of
manufacturing of luggage bags. The company's manufacturing facilities are located at
Nashik, Nagpur, Jalgaon, Satara, Sinnar in Maharashtra and Haridwar in
Uttaranchal. The company is also engaged in manufacturing of moulded furniture.
The company is engaged in manufacturing of moulded luggage (from high-density
polyethylene), soft luggage (from nylon, polyester, jupolene, printed polyester) and ABS
luggage (from acrylonitrile butadiene styrene plastic) including briefcases, suitcases,
handbags, carry bags and vanity cases.
VIP has been promoted by the $200 million DG Piramal Group. The company has a
design team, which is constantly focusing on innovating, constantly innovates,
exploring new technologies and materials to create luggage of high quality.
Globally the company has a presence in Indonesia, Hong Kong, Russia, Canada,
Iceland, Ghana, Malta, Spain, France, Belgium, Ireland, Sweden, Poland, Finland,
Greece and Lebanon among others.
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Brands
The company has five major brands in the Indian market. They are:
V.I.P
Carlton
Delsey
Footloose
Alfa
Aristocart
Skybags
Buddy
Subsidiaries
Carlton Travel Goods
Blow Plast Retail
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Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY09 FY10 FY11E FY12E
Description 12m 12m 12m 12M
Net Sales 5251.00 6362.00 7061.82 7909.24
Other Income 72.00 6.00 6.60 7.26
Total Income 5323.00 6368.00 7068.42 7916.50
Expenditure -4855.00 -5410.00 -6002.55 -6714.94
Operating Profit 468.00 958.00 1065.87 1201.55
Interest -128.00 -80.00 -77.60 -81.48
Gross profit 340.00 878.00 988.27 1120.07
Deprecation -141.00 -173.00 -193.76 -213.14
Profit Before Tax 199.00 705.00 794.51 906.94
Tax -15.00 -142.00 -158.90 -181.39
Profit After Tax 184.00 563.00 635.61 725.55
Extraordinary Items -95.00 -62.00 -55.80 -58.59
Net Profit 89.00 501.00 579.81 666.96
Equity capital 283.00 283.00 283.00 283.00
Reserves 1134.00 1439.00 2074.61 2800.16
Face value (Rs.) 10.00 10.00 10.00 10.00
EPS 3.14 17.70 20.49 23.57
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 30-Sep-09 31-Dec-09 31-Mar-10 30-Jun-10E
Description 3m 3m 3m 3m
Net sales 1251.00 1672.00 1391.00 1599.65
Other income 2.00 0.00 2.00 2.20
Total Income 1253.00 1672.00 1393.00 1601.85
Expenditure -1121.00 -1393.00 -1188.00 -1327.71
Operating profit 132.00 279.00 205.00 274.14
Interest -22.00 -18.00 -14.00 -14.28
Gross profit 110.00 261.00 191.00 259.86
Deprecation -43.00 -48.00 -40.00 -42.00
Profit Before Tax 67.00 213.00 151.00 217.86
Tax 8.00 -53.00 -41.00 -52.29
Profit After Tax 75.00 160.00 110.00 165.57
Extraordinary Items -19.00 -15.00 -11.00 -11.55
Net Profit 56.00 145.00 99.00 154.02
Equity capital 283.00 283.00 283.00 283.00
Face value (Rs.) 10.00 10.00 10.00 10.00
EPS 1.98 5.12 3.50 5.44
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Key Ratios
Particulars FY08 FY09 FY10E FY11E
No. of Shares(In Million) 28.3 28.3 28.3 28.3
EBITDA Margin (%) 8.91% 15.06% 15.09% 15.19%
PBT Margin (%) 3.79% 11.08% 11.25% 11.47%
PAT Margin (%) 3.50% 8.85% 9.00% 9.17%
P/E Ratio (x) 81.56 14.49 12.52 10.88
ROE (%) 12.99% 32.69% 26.96% 23.53%
ROCE (%) 21.93% 35.90% 32.66% 30.37%
Debt Equity Ratio 0.96 0.83 0.64 0.51
EV/EBITDA (x) 15.51 7.58 6.81 6.04
Book Value (Rs.) 50.07 60.85 83.31 108.95
P/BV 5.12 4.22 3.08 2.35
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Charts:
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Outlook and Conclusion
At the current market price of Rs.256.65, the stock is trading at 12.52 x FY11E
and 10.88 x FY12E respectively.
Price to Book Value of the stock is expected to be at 3.08 x and 2.35 x
respectively for FY11E and FY12E.
Earning per share (EPS) of the company for the earnings for FY11E and FY12E
is seen at Rs.20.49 and Rs.23.57 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 15% and
58% over 2009 to 2012E respectively.
On the basis of EV/EBITDA, the stock trades at 3.08 x for FY11E and 2.35 x for
FY12E.
We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘Strong BUY’ in this particular scrip with a target price of
Rs.303.00 for Medium to Long term investment.
Industry Overview
Consumer durables are the products whose life expectancy is at least 3 years. These
products are hard goods that cannot be used up at once.
The consumer durables sector can be segmented into consumer electronics, such as,
VCD/DVD, home theatre, music players, color televisions (CTVs), etc. and white
goods, such as, dish washers, air conditioners, water heaters, washing machines,
refrigerators, etc.
With the increase in income levels, easy availability of finance, increase in consumer
awareness, and introduction of new models, the demand for consumer durables has
increased significantly. Products like washing machines, air conditioners, microwave
ovens, color televisions (CTVs) are no longer considered luxury items. However, there
are still very few players in categories like vacuum cleaners, and dishwashers.
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Consumer durables sector is characterized by the emergence of MNCs, exchange
offers, discounts, and intense competition. The market share of MNCs in consumer
durables sector is 65%. MNC's major target is the growing middle class of India. MNCs
offer superior technology to the consumers, whereas the Indian companies compete on
the basis of firm grasp of the local market, their well-acknowledged brands, and hold
over wide distribution network. However, the penetration level of the consumer
durables is still low in India. An important factor behind low penetration is poor
government spending on infrastructure. For example, the government spending is very
less on electrification programs in rural areas. This factor discourages the consumer
durables companies to market their products in rural areas.
Sector outlook
There has been strong competition between the major MNCs like Samsung, LG, and
Sony. LG Electronics India Ltd. has announced its extension plan in 2006. The
company is going to invest $250 million in India by 2011 and is planning to establish
a manufacturing facility in Pune. TCL Corporation is also planning to establish a $22
million manufacturing facility in India.
The Indian companies like Videocon Industries and Onida are also planning to
expand. Videocon has acquired Electrolux brand in India. Also, with the acquisition of
Thomson Displays by Videocon in Poland, China, and Mexico, the company is marking
its international presence.
According to isuppli Corporation (Applied Market Intelligence), country's fiscal policy
has encouraged Indian consumer electronic industry. The reduction on import duty in
the year 2005-06 has benefited many companies, such as Samsung, LG, and Sony.
These companies import their premium end products from manufacturing facilities
that are located outside India.
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Indian consumers are now replacing their existing appliances with frost-free
refrigerators, split air conditioners, fully automatic washing machines, and color
televisions (CTVs), which are boosting the sales in these categories.
Some companies like Samsung Electronics Co. Ltd. and LG Electronics India Ltd. are
now focusing on rural areas also. These companies are introducing gift schemes and
providing easy finance to capture the consumer base in rural areas.
Growth rates
The sectors that are projected to achieve ‘excellent’ growth rates of more than 20 per
cent in terms of quantity produced are: air-conditioners (25 per cent), split air-
conditioners (60 per cent), frost-free refrigerators (54 per cent), washing machines (20
per cent), fully automatic washing machines (35 per cent), microwave ovens (35 per
cent), high-end flat panel TV (100 per cent), LCD TV (110 per cent), plasma TV (100
per cent) VCD/MP3 (20 per cent), DVDs (25 per cent), DVDs-organized (25 per cent).
There is a need to remove some anomalies affecting the growth of the industry, the
survey pointed out.
Consumer electronic manufacturers were of the opinion that in the era of digital
convergence, differential taxation policies for IT and consumer electronics products
create distortions and anomalous situations.
________________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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