VIP Industries Q1 Results Review - Weak Demand, Discounts Driving Volumes In E-Commerce: Centrum

Centrum Broking Report

VIP Industries Ltd.'s Q1 FY25 print was below our estimates; Consolidated revenue grew 0.4%, yet Ebitda/PAT declined by 38.8%/87.4% YoY. Despite subdued demand (lower wedding days/ severe heatwave), VIP clocked healthy volume growth of 11% led by-

1. muted Apr, volumes for May/June grew 31%/36%,

2. faster growth in E-com channel value/volume grew 66%/73%,

3. 16% growth in average selling price,

4. rising share of hard luggage at 56%, and

5. strategic price adjustments to cut soft luggage inventory.

VIP cut the inventory by Rs 1.2 billion in Q1. VIP said it is watching events in Bangladesh and its factory is based in EPZ zone which saw normalcy. Gross margins cut to 44.3% (-515 bp) due to higher discounting in E-com channel and liquidation of soft luggage inventory.

With rising ad-spends, others expenses grew +4.3%, though employee cost cut by 11.2% YoY. Ebitda margin fell to 7.7% (-495 bp). Management remained buoyant on demand recovery in Q3 led by higher wedding days and festivals to deliver +15% growth strengthening its premium product contribution yet deliver +15% operating margins.

With weak Q1 performance we cut our earnings and retain Buy with a revised target price of Rs 559 (implying 37 times FY26 earnings per share).

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