1

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

I

R

S

T

C

A

L

L

R

E

S

E

A

R

C

H

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

vsrsastry@firstcallindiaequity.com

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

drsastry@firstcallindia.com

C.M.P: Target Price: Rs.256.50 Rs.303.00

Share Holding Pattern

June 03, 2010

2

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)

3

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.

4

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.

5

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

6

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

7

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

8

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

9

Charts:

10

11

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.

12

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.

13

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.

14

Firstcall India Equity Research: Email – info@firstcallindia.com

B. Harikrishna Banking

B. Prathap IT

A. Rajesh Babu FMCG

C.V.S.L.Kameswari Pharma

U. Janaki Rao Capital Goods

E. Swethalatha Oil & Gas

D. Ashakirankumar Auto

Kavita Singh Diversified

Nimesh Gada Diversified

Priya Shetty Diversified

Neelam Dubey Diversified

Firstcall India also provides

Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover

Offers, Offer for Sale and Buy Back Offerings.

Corporate Finance Offerings include Foreign Currency Loan Syndications,

Placement of Equity / Debt with multilateral organizations, Short Term Funds

Management Debt & Equity, Working Capital Limits, Equity & Debt

Syndications and Structured Deals.

Corporate Advisory Offerings include Mergers & Acquisitions(domestic and

cross-border), divestitures, spin-offs, valuation of business, corporate

restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &

Execution, Project Financing, Venture capital, Private Equity and Financial

Joint Ventures

Firstcall India also provides Financial Advisory services with respect to raising

of capital through FCCBs, GDRs, ADRs and listing of the same on International

Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and

other international stock exchanges.

For Further Details Contact:

3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071

Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089

E-mail: info@firstcallindiaequity.com

www.firstcallindiaequity.com