Vip Industries Q4FY18 Concall Summary

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Financial Highlights

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  • Revenue growth of 16% corresponding to quarter of the previous year
  • Consolidated revenue growth of 10% over previous year
  • EBITDA growth of 79% compared to Q4 last year
  • EBITDA this quarter was 15.6% as opposed to 10.1% in Q4 last year
  • EBITDA growth of 89% compared to last financial year
  • EBITDA this year w as 14.3% as opposed to 10.9% last financial year

Business Updates

  • International business shrunk in Q4
  • Domestic growth was due to volumes growth
  • Growth in Aviation in giving strong tailwind to industries growth.
  • GST will strengthen formal economy hence in long run will be very beneficial for the company
  • Historically low sale Q4 has seen increased sales due to backpacks
  • Outlook for sales for  next year is very good

Brands

  • Skylar brand is growing very well
  • VIP brand is growing very well
  • Very intense campaign is being run for Carlton brand
  • Caprese, a ladies handbag brand, is doing very well
  • Caprese is currently in top three ladies handbag brand in India
  • All the four brands - Caprese, Carlton, Aristocrat and Skybags - are being advertised together for the first time

New subsidiaries 

  • Two new subsidiaries have been incorporated in Bangladesh – VIP Industries BD Manufacturing Private Limited and VIP Luggage BD Manufacturing Private Limited
  • One manufacturing facility under VIP Industries BD Manufacturing Private Limited in March 2018

Risks for VIP Industries 

  • Continued depreciation of rupee
  • Launch of aggressively priced products to counter competition

Canteen Stores Department

  • Canteen stores operate at 5% markup so distribution cost is negligible as compared to other channels
  • CSD business is coming down for VIP industries
  • CSD did not give high overdue at the end of Q4
  • CSD as a percentage of total revenue of VIP Industries is 20%

Production

  • Hard luggage is manufactured in India in VIP factories
  • Soft luggage is mixture is manufactured in China and Bangladesh

CAPEX

  • Bangladesh factory capex was Rs 8 crores
  • Company is planning capex of Rs 20 crores for next two years

Industry

  • Market share of VIP industries has been highest for many years
  • Market penetration of the category very low around 20%

Raw Material

  • 50% of material is foreign country denominated ( both raw as well as finished goods)
  • Company maintains inventory of three to four months due to this effect of currency exchange rate fluctuation is seen in the next quarter results
  • In last few months Rupee has depreciated hence it will result in margin compression
  • Prices of raw material have increased
  • 50% of the material is purchased from China
  • Polycarbonate products which are manufactured in house in India are expected to grow for many years to come because they are strong and light

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