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Prabhudas Lilladher Report
Though VIP Industries Ltd.’s topline was 10%/7% below our/consensus estimates, gross margin of 53.3% surprised positively despite raw material cost inflation.
Price hike of ~4.5% taken in March, favorable product mix and rising contribution from low cost destination Bangladesh cushioned margins.
While we cut our FY23E earnings per share estimates by 6% as we trim our gross margin assumption by 100 basis points amid persistent cost inflation and emerging supply side constraints as raw material at Bangladesh unit comes from China, our FY24E estimates are broadly intact.
VIP Industries has ear-marked a capex of Rs 300-350 million for FY23E to further expand own manufacturing capacity at Nashik/Bangladesh.
Increased self-sufficiency in manufacturing will reduce reliance on imports and not only eliminate currency volatility but also reduce freight cost resulting in margin expansion.
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