This small-cap luggage manufacturer gains 15%; what is fuelling the rally?

Stock market today, VIP Industries share price NSE BSE: Shares of VIP Industries, the luggage manufacturer, gained nearly 16 per cent in Thursday’s session (March 28) to Rs 539.4 after the company’s new MD, Neetu Kashiramka, shared the future outlook at the company’s analyst day on Wednesday. Nonetheless, at the close, the stock settled 13 per cent higher at Rs 525.85 apiece on the BSE.

For FY25, the company targets double-digit revenue growth of 14–15 per cent. Further, it aims to increase its market share in the first half of the upcoming fiscal year 2025. Besides, the company intends to streamline pricing, starting with its premium portfolio segment. 

The company also estimates its EBITDA margins to come in at 15 per cent from H2FY25. In addition, the luggage bag manufacturer will focus on better inventory management to reduce debt and interest costs.

On March 20, shares of VIP Industries marked their fresh 52-week low of Rs 449.05.

In realising its ambitious plan, the company over the last seven months under the leadership of the new MD has undergone a management rejig, wherein over 50 per cent of the senior management team is either new or handling a new portfolio. Further, the company has resorted to portfolio upgradation through premiumisation and also onboarded a multi-award-winning international designer.

Additionally, the company has shown agility in responding to global macro-industry trends by restructuring the company’s Bangladesh manufacturing.

In addition, the company reestablished customer connections by organising its first backpack roadshows in the past four years and two dealer-distributor meetings after five years.

VIP’s stock performance 

The stock of VIP Industries has been an underperformer and delivered a negative return of 6.5 per cent in the last one year.

VIP Industries’ Q3 financials

In the December-ended quarter of FY24, the company’s consolidated net profit stood at Rs 7.2 crore as against Rs 44.1 crore logged in the same period of the previous fiscal year, registering an 84 per cent decline year-over-year. The company’s operating profit also took a hit and was reported at Rs 52.3 crore in the review period.

Analysts' recommendation on the stock

Post the company’s Q3FY24 results, Axis Securities maintained a hold rating on the stock with a revised target of Rs 590. The brokerage said that it believes that fundamental demand indicators like air traffic, passenger traffic, and hotel occupancy are all trending upward. However, the company has to prove itself with the ongoing management transition and the change in top strategy, it added.

On the stock, the consensus recommendation from 10 analysts is ‘hold’ with a 1-year target of Rs 565.