VIP Industries Ltd

RETAIL RESEARCH PICK OF THE WEEK 18 Apr 2016

VIP Industries Ltd

RETAIL RESEARCH P a g e | 1

Industry CMP Recommendation Add on Dips to band Sequential Targets Time Horizon

Luggage/handbags Rs.112.30 Buy at CMP and add on declines Rs. 99-106 Rs. 127 & Rs.141 1-2 quarters

VIP Industries Ltd is the largest luggage maker in Asia and second largest in the world. The company manufactures plastic moulded suitcases, handbags, briefcases, vanity cases and luggage. It acquired UK luggage brand Carlton in 2004. It provides travel products, hard and soft-sided luggage, bags, backpacks, duffels, shoulder bags, waist pouches, sling bags, duffel trolleys, vanity cases, office bags and satchels, suitcases, and briefcases. The company offers its products primarily under the VIP, Carlton, Footloose, Alfa, Aristocrat, Skybags, and Buddy brands. It also manufactures moulded furniture under the Moderna brand. It has a market share of ~55% (as per management) in the organized luggage space in India.

Investment Rationale: Shifting trend towards organized players Rising tourism in and out of India to increase demand for luggage Increasing promotion spending Strong portfolio of brands at every price point. Transforming from luggage to lifestyle Focus on growing its premium brand Carlton Benign commodity prices to aid margins Asset-light model: Low debt-equity ratio Efficient working capital management resulting in healthy return ratios

Concerns:

Changing consumer behavior Slowdown in global/local economy Increase in raw material prices Competition from unorganized players and new entrants. Rupee weakening against dollar to increase raw material costs. Large dependence on CSD (Canteen Stores Department) which has been volatile in the past. Delay in payment from

CSD segment could affect the working capital requirements Seasonality impact with June being the best quarter and March being worst

View and Valuation: VIP is an attractive play on boost in urban and semi urban consumption. Increased spend on A&P is likely to result in higher brand recognition and recall going forward. Focus on premium brands will drive margin expansion. Shifting trend towards

HDFC Scrip Code VIPINDEQNR

BSE Code 507880

NSE Code VIPIND

Bloomberg VIP IN

CMP as on 14 Apr 16 112.30

Eq. Capital (Rs Cr) 28.26

Face Value (Rs) 2

Equity Sh. Outs (Cr) 14.13

Market Cap (Rs Cr) 1586.80

Book Value (Rs) 25.41

Avg. 52 Week Vol 525000

52 Week High 119.70

52 Week Low 70.80

Shareholding Pattern-% (Dec-2015) Promoters 52.50

Institutions 18.13

Non Institutions 29.37

Total 100.00 Research Analyst: Atul Karwa [email protected]

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quality products provided by organized players and increasing tourism in and out of India bode well for the company. With these tailwinds we expect the company to witness strong growth momentum in the coming years. We feel investors could buy the stock at the CMP and add on dips to Rs.99-106 band (14-15xFY18E EPS) for sequential targets of Rs.127 (18x FY18E EPS) and Rs 141 (20x FY18E EPS) over 1-2 quarters. Financial Summary (Rs Cr) Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%) FY15 FY16E FY17E FY18E Operating Income 291.3 253.2 15.0 295.5 -1.4 1047.7 1232.1 1417.0 1612.5 EBITDA 19.1 9.3 105.4 25.2 -24.2 77.5 99.8 127.5 159.6 PAT 11.3 8.5 32.9 15.7 -28.0 46.6 59.9 77.7 99.5 EPS (Rs) 0.8 0.6 1.1 3.3 4.2 5.5 7.0 P/E (x) 34.1 26.5 20.4 15.9 P/B (x) 20.8 16.0 12.5 10.0 RoE (%) 7.4 8.1 9.0 9.9

(Source: Company, HDFC sec)

Company Description: VIP Industries is a market leader in the branded luggage segment with about ~55 per cent market share in the organized presently, with a large portion of players in the market operating in the unbranded segment. The company also exports its products, across West Asia, the UK, the US, Germany, Spain, Italy and select African and South-East Asian countries. VIP is one of the rare consumer brands in India which has successfully defended its national leadership against global multinationals, despite their presence in India for almost 20 years. All its brands combined have the widest range in India, offering the best in class products across premium, mid-price and value segments. The primary business insight is that the purchases of handbags, office bags and backpacks are much more frequent (often annually) than the purchases of luggage (which is only purchased once every three-four years). This means that the handbag, office bag and backpack market is much larger than the luggage market, even though branded participation in this market is currently low. Skybags sales are growing 70% year-on-year for the last three years, making it the fastest growing luggage brand in India. The management expects it to continue growing by 50% per year, driven by growth in new categories such as backpacks and weekend bags. Its flagship brand VIP constitutes half its sales. Skybags is its next largest brand. It currently has over 200 company-managed stores and another 200 franchisees. It also works with over 2,000 multi-brand retailers to sell its products. Its sales are equally split across all four regions in India. The top 12 metros remain the most important markets for the company. However, its direct dealer network reaches top 400 towns and cities of India and it is planning to expand sales in smaller towns too.

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Growth of VIP Industries

The traditional brands of the company such as VIP, Alfa and Aristocrat contributed ~ 69% of its revenues in FY15. In addition to its traditional brands, the company is also looking to develop its youth oriented brands such as Skybags, Carlton and Caprese since these brands are witnessing exponential growth. VIP has its own E-comm website buytravelbags.com and is also selling its products on all the major online marketplaces like Flipkart, Amazon and Snapdeal.

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FY15 Revenue Breakup


VIP has two wholly owned subsidiaries

1. VIP Industries Bangladesh Pvt Ltd To reduce the dependency on outsourcing from China, VIP has set up a wholly owned subsidiary in Bangladesh. This company started commercial operations from Q4FY14. Bangladesh facility has turned profitable from Q4FY15. It is working at an utilization of ~70% which the management intends to increase to 85% and also expand its capacity over the next 3-5 years

2. Blow Plast Retail Ltd Blow Plast was established as a marketing subsidiary of VIP. It is largely dormant currently. VIP has invested Rs 5 lacs in the company.

Business Overview: VIP manufactures both hard and soft luggage and also hand bags and has a presence across various price points through multiple brands. It possesses a market share in excess of 50% in the organised luggage space and is among the most trusted luggage manufacturer with a strong history. The company started manufacturing in 1971 and since then, VIP Industries has sold over 60 million pieces of luggage to people around the world and has become the foremost manufacturer of hard and soft luggage in Asia. Keeping with the trend it has introduced innovative and differentiated products to cater to various customer needs. VIP is also the 2nd largest producer of luggage in the world with four factories, producing nearly five million pieces a year.

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Luggage and handbags have, over the recent years, managed to shed their traditional utilitarian tag and have now evolved as lifestyle products. Increasing business and leisure travels coupled with rising disposable income and organized retailing have led to increased demand for branded accessories. Players closely follow trends across international design houses and also actively collaborate with renowned designers to introduce aspirational products in the premium segments. Leading companies undertake intense branding and promotional campaigns to reach to a wider audience and ensure brand recall. Soft luggage continues to grow faster than hard luggage and constitutes over 70% of the Company’s sales. The only category in hard luggage which is experiencing growth is the polycarbonate category. Polycarbonate matches the convenience and features that consumers find in soft luggage i.e. lightness and four wheeling. “VIP” brand continues to dominate Indian luggage market with the largest market share of all luggage brands in India. “Skybags” brand is gaining strength and has grown fastest in all luggage brands in India. “Carlton” brand also achieved good growth during the year, especially in the premium retail channel. With a thrust on Premium end of products through the promotion of Carlton Brand, the Company is reaching out to wider audience base with unique and premium product offerings. Soft luggage constitutes over 70% of revenues


VIP manufactures an array of products and provides numerous different services with an aim to make travel simple and convenient for millions of people around the world. There products and services are carefully designed to help people

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experience the delight of travelling. A team of professional, skilled designers constantly innovate and explore new technological aspects and materials to craft luggage which is at-par with the world’s highest standards. The Product Portfolio of VIP Industries Ltd. today, consists of a diverse range of hard-sided and soft-sided luggage. The moulded furniture range includes strollys, suitcases, duffel-bags, backpacks, executive cases, overnight travel solutions and school bags. VIP Industries Ltd. has a presence in 27 countries. With a product range which includes Injection Moulded PP Cases and Furniture, Vacuum formed PC and ABS cases and Soft sided luggage in Nylon, Polyester and EVA material, VIP Industries Ltd has several innovations in product design and technology. Many of these innovations are patented in India as well as internationally.

Non Reversible Multi Safe Lock – so that the suitcase opens only right side up. Soft Grip handles – for carrying comfort. Security cable and Security Chain – inbuilt in the luggage. Dual action lock – for double security. Heat sealing method for lining fusing – for fully fabric lined suitcase. Heat sealing method for lining fusing (USA, UK) Bumpers on luggage – to protect suitcase corners from drops and conveyor belt impact. Gravity Side Core – patented process for simplified manufacturing. Central Locking System – to facilitate locking of all the three locks on the luggage, with single stroke key operation. Seculink – an inbuilt security cable locking mechanism. The cable normally remains in retracted condition inside the

luggage, and can be taken out with just a press of button, so that the luggage can be tied and locked to any firm object for security

Convipack – a flexible panel fixed in the top half to pack wet or used clothes, completely separate from contents in the bottom half of the suitcase.

Investment Rationale: Shifting trend towards organized players. The organized sector across the luggage segment constitutes only 35-40% of the total market where as the unorganized sector constitutes 60-65% of the total market indicating huge potential to improve the share of organized sector in the coming years. The company has ~55-60% (according to management) of market share in organized market and is likely to improve on the back of consumer discretionary spending and recovery in economic activity. Increased travel activity across the globe is likely to benefit the company. Luggage is seen as a fashion and style statement by the increasingly young buyers and they prefer to buy from products of organized players which have a brand following. Even though the price difference is as much as 25% between the organized and unorganized market, players like VIP are expected to eat into the share of unorganized market as customers today prefer good quality and long lasting products.

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Price comparison of the unorganized and organized market


A May 2013 report on the Indian luggage industry by market research firm, Research and Markets, said the luggage market is expected to grow at a compound annual growth rate (CAGR) of 18% between fiscal years 2014 and 2018. The growth is likely to be driven by increasing personal disposable income, travelling expenditure of the households, development of retailing and speciality stores and growing acceptance of luggage bags as a lifestyle product by the customers. Introduction of GST in FY16/FY17 could also improve the positioning of the organized players vis-à-vis the unorganized players. Payouts of 7th pay commission expected later in 2016 and OROP could also result in higher demand growth for luggage as more people will like to travel more often. Rising tourism in India to increase demand for luggage The Indian tourism market has grown at CAGR of 9.7% in the last 10 years over FY05-FY15 to US $41.6 bn. As per World Travel & Tourism council report on India, the Indian tourism market is poised to grow at a CAGR of 7.8% to US $95.3 bn by 2026. Changing lifestyles, increasing urbanization, and growing interest of people in tourism are leading to an increasing demand for luggage.

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Tourism market is poised to grow at a CAGR of 7.8% to US $95.3 bn

(Source: WWTC, HDFC sec)

Air traffic has grown at CAGR of 13.2% to 82.8 mn passengers over FY04-FY14

(Source: World Bank, HDFC sec)

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The growing Indian economy has also created a class of business people who are travelling across the country looking to expand their business. With the advent of low cost airlines, the volume of air travelers has also increased significantly. Air traffic has grown at CAGR of 13.2% in the 10 year period 2004-2014 to 82.8 mn passengers. The domestic airline industry recorded volume growth of over 20% in 2015. VIP having the largest market share in luggage and an established distribution network is in the right position to tap this growing opportunity. Increasing promotion spending Advertising and promotion (A&P) spend by the company has been increasing as the company tries to make further inroads in the unorganized segment. VIP has also been launching newer and innovative products, keeping in trend with consumer choices. Its A&P expenses has increased from 4.9% of net sales in FY11 to 6% of net sales in FY15. To increase awareness of its products, the company has recently roped in Hrithik Roshan to be the brand ambassador of VIP. Earlier it had brought on board Alia Bhatt as the brand ambassador of Caprese, which heightened brand awareness and successfully added to the high fashion imagery of the brand. It has also signed on Varun Dhawan to promote its youth offering Skybags, to directly connect with the youth creating a portrait that mirrors their personality. With more young customers travelling at an early age, styling in bags has become a necessity. While the ad campaigns are likely to result in higher expenses (part of which may be booked over 2-3 years if the management so decides), a favourable impact is possible on the sales growth and in turn on margins of the company. A&P expenses as a percentage of sales


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Strong portfolio of brands at every price point VIP is present at every price point right from affordable and value for money to premium segment brands making a style statement. Brands Customer base Carlton High-end segment VIP High-end segment Aristocrat Mid-segment Skybags Mid & Sub mid-segment Alfa Lower-end segment Caprese Mid-segment Ladies Hand Bags Carlton: VIP bought the brand in 2004 but launched it in India in 2011. With a thrust on Premium end of products through the promotion of Carlton Brand, the Company is reaching out to wider audience base with unique and premium product offerings. VIP: Established in 1971, VIP Bags, has made a mark in the luggage industry with at-par quality and vibrant designs. With an ultramodern, high-tech design lab at Nasik, it has several international patents and design registrations. Skybags: Skybags is aimed at travellers who like to make a style statement everywhere they go. While the bags offer world class functional features, the brand is committed to help you 'Move in Style' through vibrant and unique designs that add an edge to the traveller's personality. Apart from being the first Indian brand to manufacture printed polycarbonate luggage, Skybags also manufactures a wide variety of products like trolleys, rucksacks, backpacks, duffel-bags, laptop bags, everyday travel accessories and short haul essentials made from quality materials. Caprese: Established in 2012, Caprese offers ladies handbags which are a symbol of the international fashion inspired by the isle of Capri. Caprese bags are made with a distinctly modern design language. It is now available at more than 500 points of sale across the country, across many distribution channels including select Company-run exclusive stores, franchisee stores, multi brand dealers and leading Departmental chains like Shoppers Stop, Lifestyle and Central as well as e-commerce platforms. Aristocrat: Aristocrat caters to the demands of the frequent traveller of the Indian heartland. Since its inception, this brand has strived hard to provide durable products at a pocket friendly cost. It offers an array of luggage options such as Soft Uprights, Duffles, Vanity Cases, Hard Suitcases, Briefcases and Uprights for consumers. Alfa: Alfa is popularly known as the value-for-money brand from the house of VIP Industries Ltd. The brand came into existence in the year 1987 and quickly became one of the biggest brands in the luggage industry of India. With hard luggage products in its kitty, Alfa caters to the various demands of the value conscious customers. With over 25 lakh units selling

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each year, Alfa has developed rapidly and is still growing at steady rate of 25%. With an wide variety of products like Soft Uprights, Duffle Bags, Duffle Trolleys, Vanity Cases, Hard Suitcases and Briefcases, Alfa has a vast network of over 13,000 retail outlets all over India. Transforming from luggage to lifestyle In lifestyle segment, the company is focusing on two big categories, including Skybag backpacks, and ladies handbags under its brand, Caprese. In keeping with the times the company is transforming itself from luggage to lifestyle categories. Products in lifestyle categories are purchased more frequently than luggage so the growth as well as sales will be larger for these categories. With the current categories, the brand focuses on scaling up rather than new acquisitions over the next few years. Purchases of handbags, office bags and backpacks are much more frequent (often annually) than the purchases of luggage (which is only purchased once every three-four years). This means that the handbag, office bag and backpack market is much larger than the luggage market, even though branded participation in this market is currently low. VIP has always been strong in travel products for the long haul. It has lately increased focus on introducing travel products for short haul like backpacks, business bags, ladies bags etc. Focus on growing its premium brand Carlton VIP has set target on growing the premium segment through its brand- Carlton and is looking to open 25 stores in 2016-17 alongwith significant investment toward the brand promotion. VIP bought the brand in 2004 but launched it in India in 2011. VIP Industries has over 200 company managed stores, another 200 franchise outlets and work with over 2,000 multi-brand retailers. It is also looking at increasing its shop-in-shops in multi-brand stores to promote Carlton. Carlton is a British brand aimed at premium business travellers. So its distribution is focused on up-scale retail formats, i.e. shop-in-shops inside its store network of 250 VIP Lounges. The company is also planning to open 25 exclusive Carlton stores. Benign commodity prices to aid margins Prices of Polypropylene a derivative of crude oil, have declined over the past few quarters in line with fall in crude oil prices. Polypropylene is a key raw material in the manufacture of hard luggage which roughly accounts for 1/4th of the company’s revenues. The fall in prices has resulted in margin expansion for the company in the current year. With crude prices expected to remain in the range of $40-60 per barrel over the next couple of years, polypropylene prices are not expected to increase significantly, thereby supporting the margin increase of the company.

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Polypropylene prices (Rs./100kgs)


Asset-light model: Low debt-equity ratio VIP works on asset-light model as it outsources a significant portion of its products to China/Bangladesh. Globally, China is the hub for soft luggage sourcing. Most of the players in the unorganized market also import products manufactured in China. VIP provides the design, branding and distribution for its luggage while the manufacturing part is outsourced to China. This helps the company in keeping a low debt-equity ratio ad high Sales to Fixed Assets ratio. The company has reduced its debt from over Rs 100 cr in FY11 to Rs 31 cr in FY15. This is mostly working capital debt. This also helps in reducing the interest burden on the company. Low debt resulting in high Interest Coverage ratio


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Efficient working capital management resulting in healthy return ratios VIP has a very healthy working capital management. Inspite of having sales in excess of Rs.1000 cr it has a very comfortable receivables and inventory position. As a result the company does not have very high working capital borrowing needs resulting in high return ratios. Concerns:

The huge unorganized market (60-65%) makes the company very sensitive to consumer behaviour changes. The consumer behaviour is subjective and is likely to change based on various factors such as income, tastes or opinions. Psychological pricing plays a key role in pricing of products.

Competition from unorganized players (60-65%) and low pricing strategy from the unorganized sector due to substandard quality may hit sales if proper marketing and advertising strategy is not adopted. Further looking at the potential in the Indian market we may see new entrants which might result in lower market share for the company.

Recession in Global/local economy/Slowdown in economic activity: The global economy is very volatile and is vulnerable to recession. Any untoward events may significantly affect the growth in business of the company as ~10% of its sales in FY15 are from exports. Further in case the local economy witnesses a slowdown, then it could see an impact on local sales too

Increase in raw material prices: The increase in raw material prices will impact margins of the company if proper strategy is not adopted. The raw materials mainly include Polycarbonate, Aluminum sections, Polypropylene etc. Any increase in the prices of these materials will affect the margins if the cost is not passed on to the customer which is price sensitive.

Exchange rate risks especially volatility of Yuan: The company sources soft luggage from China. It constitutes 70% of revenues. Any serious volatility in value of Yuan can affect the margins in the short term. Any sustained weakening of Rupee vs the USD could also impact its imports and in turn the margins. Further its exports for FY15 were Rs.95 cr while imports were large at Rs.351 cr.

Delay in payment from CSD segment to affect the working capital: The company derives 20%-22% of sales from CSD (Canteen Stores Department) segment. It is a government organization catering to army, defence and navy; and offering the products at CSD price, which is less than the market price in the general market. Sales from this segment has been volatile in the past. Further any delay in payment from the CSD segment might affect the working capital of the company.

VIP is impacted by seasonality with June being the best quarter and March being the worst, as people travel the most in the summer months of April-May.

View and Valuation: VIP is an attractive play on boost in urban and semi urban consumption. Increased spend on A&P is likely to result in higher brand recognition and recall going forward. Focus on premium brands will drive margin expansion. Shifting trend towards quality products provided by organized players and increasing tourism in and out of India bode well for the company. With these tailwinds we expect the company to witness strong growth momentum in the coming years.

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We feel investors could buy the stock at the CMP and add on dips to Rs.99-106 band (14-15xFY18E EPS) for sequential targets of Rs.127 (18xFY18E EPS) and Rs 141 (20xFY18E EPS) over 1-2 quarters. Quarterly Financials

(Rs Cr) Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%) 9MFY16 9MFY15 YoY (%) Operating Income 291.3 253.2 15.0 295.5 -1.4 941.2 801.5 17.4 Material consumed 164.2 144.0 14.0 168.0 -2.3 528.0 445.9 18.4 Employee expenses 31.5 26.4 19.3 30.9 1.9 91.4 77.7 17.6 Other expenses 76.5 73.5 4.1 71.4 7.1 238.2 216.8 9.9 Total expenses 272.2 243.9 11.6 270.3 0.7 857.6 740.4 15.8 EBITDA 19.1 9.3 105.4 25.2 -24.2 83.6 61.1 36.8 Depreciation 3.1 3.4 -8.8 3.0 3.3 9.2 12.0 -23.3 Other Income 0.5 6.4 -92.2 0.4 25.0 1.4 7.8 -82.1 Interest 0.3 0.3 0.0 0.5 -40.0 1.3 0.6 116.7 PBT 16.2 12.0 35.0 22.1 -26.7 74.5 56.3 32.3 Tax expenses 4.9 3.5 40.0 6.4 -23.4 22.4 17.2 30.2 PAT 11.3 8.5 32.9 15.7 -28.0 52.1 39.1 33.2 EPS 0.8 0.6 32.9 1.1 -28.0 3.7 2.8 33.2


Financials

Income Statement (Rs Cr) FY14 FY15 FY16E FY17E FY18E Income from operations 972.8 1047.7 1232.1 1417.0 1612.5 Material Cost 532.3 572.8 690.0 779.3 875.6 Employee Cost 93.3 109.7 128.1 144.5 162.9 Other expenses 266.9 287.8 314.2 365.6 414.4 Total expenses 892.5 970.2 1132.3 1289.4 1452.9 EBITDA 80.3 77.5 99.8 127.5 159.6 Depreciation 17.1 17.5 14.5 15.9 17.3 EBIT 63.2 60.0 85.3 111.6 142.3 Other Income 2.6 2.5 2.2 2.4 3.1 Interest 1.8 1.3 1.9 1.5 1.1 PBT 79.8 65.5 85.6 112.6 144.3 Tax Expenses 22.1 18.9 25.7 34.9 44.7 PAT 57.6 46.6 59.9 77.7 99.5 EPS 4.1 3.3 4.2 5.5 7.0


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Balance Sheet (Rs Cr) FY14 FY15 FY16E FY17E FY18E EQUITY AND LIABILITIES

Share Capital 28.3 28.3 28.3 28.3 28.3 Reserves and Surplus 258.8 277.5 305.1 340.8 386.6 Shareholders' Funds 287.0 305.8 333.3 369.1 414.8 Long Term borrowings 0.0 0.0 0.0 0.0 0.0 Deferred Tax Liabilities (Net) -1.4 -3.1 -3.1 -3.1 -3.1 Other Long Term Liabilities 1.0 1.5 1.2 1.6 1.9 Long Term Provisions 2.9 3.1 4.2 4.8 5.2 Non-current Liabilities 2.5 1.4 2.3 3.3 4.0 Short Term Borrowings 16.1 31.0 26.0 21.0 16.0 Trade Payables 99.1 119.0 124.0 149.6 172.1 Other Current Liabilities 20.4 20.4 25.3 28.9 32.5 Short Term Provisions 22.6 18.6 25.6 28.9 31.7 Current. Liabilities 158.1 189.1 201.0 228.3 252.4 TOTAL 447.6 496.3 536.6 600.7 671.2 ASSETS

Fixed Assets

Gross Block 291.8 276.6 284.6 299.6 314.6 Less: Acc. Depreciation 207.0 205.3 219.8 235.7 253.0 Net Block 84.9 71.3 64.8 63.9 61.6 Capital work-in-progress 0.7 1.1 1.1 1.1 1.1 Long-Term Loans and Advances 28.9 24.2 24.2 24.2 24.2 Other Non-current Assets 0.0 4.5 4.5 4.5 4.5 Non-current Assets 29.0 28.7 28.7 28.7 28.7 Inventories 175.6 226.9 234.9 278.1 324.8 Trade Receivables 95.0 111.1 135.1 151.4 174.5 Cash and Bank Balances 11.1 7.5 12.6 7.2 2.4 Short-Term Loans and Advances 25.3 24.2 32.3 35.6 40.1 Other Current Assets 26.0 25.6 27.2 34.6 38.2 Current Assets 333.0 395.3 442.0 507.0 579.8 TOTAL 447.6 496.3 536.6 600.7 671.2


Cash Flow Analysis (Rs Cr) FY14 FY15 FY16E FY17E FY18E Profit Before Tax 79.8 65.5 85.6 112.6 144.3 Depreciation 17.1 17.5 14.5 15.9 17.3 Others -16.5 -5.0 1.6 1.9 1.4

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Change in working capital -8.0 -43.4 -23.8 -37.4 -48.2 Tax expenses -22.1 -21.0 -25.7 -34.9 -44.7 Cash flow from Operating activities 50.3 13.6 52.3 58.1 70.0 Net Capex -20.5 -10.8 -8.0 -15.0 -15.0 Other investing activities 9.7 0.0 0.0 0.0 0.0 Cash flow from Investing activities -1.8 -2.9 -8.0 -15.0 -15.0 Proceeds from Eq Cap 0.0 0.0 0.0 0.0 0.0 Borrowings / (Repayments) 0.0 0.0 -5.0 -5.0 -5.0 Dividends paid -24.5 -28.0 -32.4 -42.0 -53.8 Interest paid -1.3 -0.8 -1.9 -1.5 -1.1 Cash flow from financing activities -49.3 -13.9 -39.3 -48.4 -59.9 Net Cash Flow -0.9 -3.2 5.0 -5.3 -4.9


Financial Ratios Particulars FY14 FY15 FY16E FY17E FY18E EPS 4.1 3.3 4.2 5.5 7.0 Cash EPS (PAT + Depreciation) 5.3 4.5 5.3 6.6 8.3 Book Value Per Share(Rs.) 20.3 21.6 23.6 26.1 29.4

PE(x) 27.5 34.1 26.5 20.4 15.9 P/BV (x) 5.5 5.2 4.8 4.3 3.8 Mcap/Sales(x) 1.6 1.5 1.3 1.1 1.0 EV/EBITDA 19.9 20.7 16.0 12.5 10.0

EBITDAM (%) 8.3 7.4 8.1 9.0 9.9 EBITM (%) 6.5 5.7 6.9 7.9 8.8 PATM (%) 5.9 4.4 4.9 5.5 6.2

ROCE (%) 21.1 18.7 24.5 29.8 34.7 RONW (%) 21.2 15.7 18.8 22.1 25.4

Current Ratio 2.1 2.1 2.2 2.2 2.3 Quick Ratio 1.0 0.9 1.0 1.0 1.0 Debt-Equity 0.1 0.1 0.1 0.1 0.0

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1 year price movement

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RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office

HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email: [email protected].

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Fundamental Research Analyst: Atul Karwa, [email protected]

VIP Industries Ltd

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