Buy VIP Industries; target of Rs 579: Prabhudas Lilladher

Prabhudas Lilladher's research report on VIP Industries

We initiate coverage on VIP Industries Ltd (VIP) with a BUY rating given market leadership (~50% revenue share) in the organized luggage industry, well-diversified product portfolio (six brands and multiple SKUs exceeding 1,500) and solid brand salience (brand-ex is ~5-7% of sales). Strong distribution network (~11,000 touch points), GST implementation (narrowed pricing gap with unorganized players resulting in up-trading) and entry into the under penetrated ladies hand bags and backpack market is likely to drive sales/PAT at a CAGR of 23.7%/25.1% over FY18-21E. While headwinds from currency & crude volatility prevail, product premiumisation (rising share of Caprese and Carlton) and increase in production from captive facilities at Bangladesh will aid in 40bps EBITDA margin expansion over FY18-21E.

Outlook

We expect premium valuations (32.7x FY20E and 25.3x FY21E) to sustain given strong growth prospects, debt free BS, high return ratios (RoE/RoCE of 25.6%/36.9% in FY18; to expand by 230bps/310bps over FY18-21E), and healthy dividend pay-out (average 41% over last 5 years). Initiate with a BUY and TP of Rs579.

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Read More First Published on Mar 25, 2019 05:16 pm

Bandhan Bank falls 3% as Macquarie sees pressure till promoter stake reduction

Bandhan Bank shares fell more than 3 percent in the morning trade on March 18 after Macquarie said it expects selling pressure to continue in the stock till promoter reduce stakes.

The stock was quoting at Rs 497.90, down Rs 13.15, or 2.57 percent on the BSE, at 0947 hours IST.

Macquarie has an underperform call on the bank with a price target at Rs 400 apiece, implying 22 percent potential downside from current levels.

The stock can remain under pressure till promoter stake reduction is done, according to the brokerage house said.

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It said HDFC, which sold Gruh Finance to Bandhan Bank, must sell 5.06 percent equity in the merged company before the merger can consummate.

HDFC's 5 percent stake sale can result in supply pressure of Rs 3,000 crore based on current market price, it added.

Macquarie is concerned by the expensive acquisition of Gruh and what it means for future capital allocation.

In January, the board members of Bandhan Bank approved the scheme of amalgamation of Gruh Finance into and with the Bank.

On March 14, the Reserve Bank of India conveyed it has no objection for the voluntary amalgamation. HDFC held 57.83 percent stake in Gruh Finance as of December 2018. That means, HDFC will have about 15 percent stake in the merged entity.

RBI also granted in-principle approval to HDFC to acquire shareholding of 9.9 percent or less of the paid-up voting equity capital of Bandhan Bank upon the effective date of the scheme.

HDFC had sought RBI's approval to acquire and hold 14.96 percent or such other lower percentage stake in Bandhan Bank.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions. First Published on Mar 18, 2019 10:16 am