Tag - margins

Double-Digit revenue growth expected in FY22 – Mindtree

Update on Indian Equity Market:

On Thursday, markets ended higher with Nifty closing 70 points to close at 15,924. HCLTECH (+5.0%), L&T (+3.7%), WIPRO (+3.0%) were the top gainers on the index while ONGC (-3.0%), EICHERMOT (-1.3%) and BHARTIARTL (-0.9%) were the top losers for the day. Among the sectoral indices,  REALTY (+4.2%), IT (+1.3%), and BANK (+0.7%) were top gainers, while AUTO (-0.4%), MEDIA (-0.4%), and PSUBANK (-0.3%) were the losers.

Excerpts of an interview with Debashis Chatterjee, MD, and CEO of Mindtree on CNBCTV18 dated 14th July 2021:

  • Robust Deal Pipeline and order book growth was seen and more renewals led to an increase in the scope of the value of the deals and the new deal wins have been characterised by multi-year long-term deals and not just project-based deals.
  • The company’s strategy of 4x4x4 across 4 of its major service lines is helping the company cross-sell and upsell a lot of the services in the existing deals in its 4 service lines of Customer Service, Data Analytics, Cloud Management, and Enterprise IT.
  • The company has guided for double-digit revenue growth of around 20% and improved EBIT margins in FY22. It hopes to achieve this as a result of the foundational changes in cost efficiencies it has done over the last 2-3 years.
  • Quarter specific and client specific headwinds may occur on the margins front. With the opening up of client businesses and increase in revenue growth aided discretionary spending, the company expects a topline growth as well.
  • The company is rolling a subsequent wage hike in Q2FY22 to deal with high levels of attrition currently faced by the industry. The company plans to undertake significant outreach programs with its personnel to manage attrition.
  • BFSI is seeing significant revival and the company expects its client base and deal wins to grow over the next few quarters after covid-induced consolidations. As far as the Travel Sector is concerned the effects of the pandemic are still looming. Full recovery may take some quarters, new contactless business models may help the company with new deal wins as the clients reimagine their business models.

Asset Multiplier Comments:

  • All Indian IT companies are enjoying the tailwinds arising out of the pandemic. Mindtree is well poised to grow further due to growth in upcoming technologies.
  • The Company is making efforts to deal with the issue of rising attrition. The rising attrition is a result of a talent war in the Indian IT Industry due to the low supply of skilled professionals.

Consensus Estimates (Source: market screener website): 

  • The closing price of Mindtree was ₹ 2,732/- as of 15-July-2021.  It traded at 33x/30x/25x the EPS estimate of ₹ 84/ ₹ 92/ ₹ 108 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 2,830/- which trades at 26x the EPS estimate for FY24E of ₹ 108/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect robust demand but need to watch for supply issues– Galaxy Surfactants

Update on the Indian Equity Market:

On Thursday, Nifty snapped its two-day losing streak to end at 15,738 (+0.7%). Among the sectoral indices, MEDIA (+4.6%), REALTY (+3.3%), and PSU BANK (+2.4%) led the gainers while AUTO (-0.1%) was the only sectoral loser. Among the stocks, BAJFINANCE (+7.7%), BAJAJFINSV (+3.8%), and SBIN (+2.6%) led the gainers while BAJAJ-AUTO (-1.0%), EICHERMOT (-0.7%), and UPL (-0.7%) led the losers.

Excerpts of an interview with Mr. U Shekhar, Founder, and MD, Galaxy Surfactants (GALAXYSURF) with CNBC TV-18 on 9th June 2021:

  • Operating margins have gone down in 4QFY21 due to a sharp increase in raw material prices. As a result, revenue increase has been in direct correlation with the increase in material prices.
  • Overall, for the year sales volume growth was ~5.2% with specialty care products growing 15.7% in 2HFY21 over 1HFY21. Performance surfactants volume grew ~8.8% in FY21.
  • FY21 and FY22E are going to be focused on mitigating supply chain disruptions. Demand will be strong with a focus on GALAXYSURF’s response to customers’ supply chain requirements.
  • New products have been launched and expect EBITDA per ton to increase sequentially.
  • The delay in the arrival of raw material along with sustained higher freight costs remains a concern for the regular availability of raw material.
  • There could be certain costs to maintain an inventory that might have a marginal impact on margins.
  • FY21 was a ten months performance, especially for India. The US and Egypt business was not impacted as much, in terms of operations. The growth in terms of specialty care was in 2HFY21 when customers’ demand improved. With the introduction of new products in FY22, they are confident of additional revenues from new customers. A 6-8% volume growth is expected.
  • International sales have remained stable at ~65%. Mr. Shekhar expects a ratio of 65-35/67-33 for international and domestic sales.

 

Asset Multiplier Comments

  • The Company has given a Capex guidance of Rs 1.5bn for FY22, with a large part to be spent on the specialty care portfolio. The ongoing capex projects are expected to be completed in 1HFY22, resulting in the introduction of new products, which will aid volume growth post 2HFY22.
  • With clients’ focus on reducing carbon footprint, the launch of new green products will strengthen the Company’s market position in specialty care products.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of GALAXYSURF was ₹ 3,061/- as of 10-June-2021. It traded at 34x/ 30x the consensus earnings estimate of ₹ 89/102 for FY22E/FY23E respectively.
  • The consensus target price of ₹ 2,742/- implies a PE multiple of 27x on FY23E EPS of ₹ 102/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect a demand recovery once restrictions are lifted – Blue Star

 

Update on Indian Equity Market:

On Monday, markets were on the rise, with Nifty increasing 128 points to close at 14,950. COAL INDIA (8.2%), UPL (8.0%), and HINDALCO (6.2%) were the top gainers on the index while SHREECEM (-1.9%), BRITANNIA (-1.28%), and ULTRACEMCO (-1.28%) were the top losers for the day. Among the sectoral indices, Metal (4.7%), PHARMA (2.8%), and MEDIA (+2.5%) led the gainers. There were no sectoral losers for the day.

 

Excerpts of an interview with Mr. B Thyagarajan MD of Blue Star with CNBC- TV 18 dated 7th May 2021:

 

  • Till 15-April-21, secondary sales were growing at a healthy pace. The increased restrictions have resulted in the slow down of Air- Conditioning and Commercial Refrigeration verticals.
  • The company feared a washout as evidenced in Q1FY21 but it actually posted a 20% lower compared to its earnings in Q1FY20. The Company hopes sales could normalize by the end of May and sees recovery in the months of June-July owing to a hot extended summer.
  • Blue Star had already hiked prices as of 1st April. As the Company has significant inventories owing to slow down, it doesn’t expect any more margin pressure and expects it to stabilize around 8%.
  • The company witnessed a stellar growth in the pharma-health care sectors across air-conditioning and commercial refrigeration verticals due to covid-19 developments and vaccine transports.
  • The manufacturing sector in both Electro-Mechanical and Air-Conditioning segments showed good growth in Q4FY21. The 1st financial quarter is seasonally focused on residential air-conditioning sees its growth prospects dampened due to lockdowns. 
  • Capacity expansion will be operational in the Wada plant for Deep Freezers by Q2FY22 and another plant is expected to be operational in H1FY23 for Air conditioning in Sri City.
  • It expects pent-up demand to drive residential air conditioning growth by around 10% for FY22 owing to prolonged work from home exposure and reduced spending on other luxuries.

 

Asset Multiplier Comments:

  • The seasonal nature of the company’s demand may impact the performance in the short term. The improved macro factors, longer summers due to climate change present good growth prospects over the long term.
  • The margins have been beaten down due to various factors, we expect pressure to ease off in the medium term.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Blue Star was ₹ 833/- as of 10-May-2021.  It traded at 44x/ 32x the consensus EPS estimate of ₹ 19/ ₹ 26 for FY22E/23E respectively.
  • The consensus price target is ₹ 790/- which trades at 30x the EPS estimate for FY23E of ₹ 26/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Plan to cross USD 1bn revenue by FY23 – Laurus Labs

Update on the Indian Equity Market:

The Nifty50 made a comeback in the last hour to end the day a little changed at 14,634. Among the index components, SBILIFE (+5.4%), BHARTIARTL (+4.5%), and ADANIPORTS (+4.5%) ended the day with gains. TITAN (-4.6%), INDUSINDBK (-2.3%), and RELIANCE (-1.9%) ended in the red. METAL (+2.2%), FMCG (+1.1%), and PHARMA (+0.3%) were the top sectoral gainers while MEDIA (-1.4%), PRIVATE BANK (-1.1%), and BANK (-1.0%) led the sectoral losers.

Excerpts of an interview with Mr. Satyanarayana Chava, Founder & CEO, Laurus Labs aired on CNBC TV-18 on 30th April 2021:

  • Laurus Labs recently declared 4QFY21 results, wherein Active Pharmaceutical Ingredient (API) revenue is up 88 percent and formulations are up 61 percent YoY. EBITDA margins reported were 33.4%.
  • They have the capacities, products to be made, and customer demand and expect reasonable growth in FY22.
  • The 30% + EBITDA margin is a benchmark. They will aim to achieve these margins to maintain healthy growth.
  • They continue to invest in infrastructure, investing Rs 7,000mn in FY21. They have earmarked Rs 15,000-17,000 mn for FY22 and FY23 for capex to augment their capacities in all 3 divisions.
  • The growth in API business has nothing to do with manufacturing Covid-19 drugs. The growth came primarily from antiretroviral, oncology and contract manufacturing for other generic companies. So far, there hasn’t been any disruption in the supply chain and no impact is expected from the 2nd Covid wave. There was an increase in logistic cost though.
  • The internal target is to cross USD 1bn in revenues by FY23E. With the capex incurred in FY21 and planned in FY22-23E, there will be a growth in revenues in FY22-23E.
  • The raw material price increase in products such as Paracetamol and Azithromycin was due to higher demand. In the products Laurus labs is manufacturing, the demand has not shot up as it has for the 2 products.
  • They are not passing on any of the incremental costs to customers. Due to covid-19, there was an incremental expense of USD 10mn, which was not passed onto customers.
  • Rather than investing in a one-time product, they are investing in the longer term. There is significant investment being made in the CRAMS business as they foresee sizeable growth in that division.

Asset Multiplier Comments

  • The ramp-up in formulations business is expected to continue over FY20-23E. The execution in the US and EU are crucial to drive the next leg of formulations growth.
  • With a renewed focus on the synthesis segment, with R&D, increase in the number of customers, and addition of capabilities positions Laurus to evolve its business mix over the next 3-5 years.

Consensus Estimate: (Source: market screener website)

  • The closing price of LAURUSLABS was ₹ 478/- as of 03-May-2021. It traded at 22x/ 20x the consensus earnings estimate of ₹ 21.3/ 23.9 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 414/- implies a PE multiple of 17x on FY23E EPS of ₹ 23.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expect 20 percent plus EBITDA margins to continue – Mindtree

Update on the Indian Equity Market:

The Indian Equity market indices gained after the Indian government announced that all citizens over the age of 18 can have Covid-19 vaccinations from May 1.  The markets pared morning gains as investors were worried due to the increasing Covid-19 cases in the second wave. Nifty 50 ended at 14,296 (-0.4%).  Among the stocks, DRREDDY (+3.6%), BAJAJFINSV (+3.5%), and HDFCLIFE (+3.0%) ended with gains while ULTRACEMCO (-4.9%), HCLTECH (-3.4%), and HDFC (-3.3%) led the losers. Among the sectoral indices, MEDIA (+3.0%), PHARMA (+1.3%), and AUTO (+1.0%) led the gainers while IT (-1.4%), FMCG (-0.6%), and FINANCIAL SERVICES (-0.6%) led the losers.

Excerpts of an interview with Mr. Debashis Chatterjee, MD & CEO, Mindtree aired on CNBC TV-18 on 19th April 2021:

  • Mindtree reported 4QFY21 quarterly results, with the consolidated net profit reporting a ~54% YoY growth to Rs 3,174 mn due to strong operational efficiency.
  • Two successive quarters of 5percent plus growth instills confidence in the Company in terms of momentum generated by deal closures.
  • The order book stood at USD 1.4 bn as of 31-March-21. The order book was 12% more than the previous year. The pipeline has never been stronger and with the changes done in terms of the 4*4*4 strategy- the execution is going well.
  • They have focused on some of the strategic accounts and focusing on cross-selling and up-selling as a part of their strategy. Considering these factors, they remain confident of delivering double-digit growth in FY22E and maintaining the margins at 20 percent plus.
  • They have added net 1600 employees in 4QFY21. Owing to a strong pipeline and a high demand, Mr. Chatterjee expects hiring to be robust in the next couple of quarters.
  • The war for talent has aggravated in the last couple of quarters. With a focus on cross-skilling of employees, they have been able to contain the attrition.
  • There has been a delay in BFSI deal closures, which are expected to happen in 1QFY22. Given the interest rate regimes, there have been some in-sourcing trends in the banking clients. Post the deal closures in 1QFY22, there is some recovery expected in the BFSI vertical.

Asset Multiplier Comments

  • The commentary on deal signings, consistent margin improvement, and the ability to sustain these improved margins are key positives for the Company.
  • The pandemic accelerated clients’ interest in Data, Cloud migration, and other disruptive technologies, across IT services companies. This is expected to benefit IT services companies for the foreseeable future.

Consensus Estimate: (Source: market screener website)

  • The closing price of MINDTREE was ₹ 2,033/- as of 20-April-2021. It traded at 25x/ 24x the consensus earnings estimate of ₹ 80.1/ 86.1 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 1,857 implies a PE multiple of 22x on FY23E EPS of ₹ 86.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Looking to maintain double-digit growth over FY23-24E – TCS

Update on the Indian Equity Market:

After a mid-week break, markets continued to remain volatile as Nifty started the day lower but managed to close 0.5% higher at 14,581. Within the index, TCS (4.0%), WIPRO (3.5%) and CIPLA (3.3%) charged the index higher while GRASIM (-3.1%), EICHERMOT (-3.0%) and MARUTI (-2.5%) led the losers. Among the sectoral indices, PHARMA (1.4%), METAL (1.4%), and FIN SERVICES (1.2%) were some of the winners while PSU BANK (-1.3%), AUTO (-1.3%), and MEDIA (-0.7%) closed in the red. 

Excerpts of an interview with Mr. Rajesh Gopinathan, MD & CEO, NG Subramaniyam, COO, V Ramakrishnan, CFO, and Milind Lakkad, Executive VP of Tata Consultancy Ltd (TCS) with CNBC -TV18 dated 13th April 2021:

  • During the Mar-21 quarter, almost all the markets and verticals reported sequential growth. The hospitality and travel areas are still under stress. In response, the company is coming up with new ways of investments and then preparing for the post-pandemic era. 
  • The technology shift is moving as per the expected trajectory. The industry is witnessing overall growth in the transformation agenda.
  • With the deal momentum of US$ 9.2bn, a mixture of smaller and big deals, and an improving economic outlook, the company has set the target of maintaining double-digit growth in revenues over FY23-24E.
  • As per the full-year plans for TCS, the company completed 19,400 hires. The number includes hiring for FY22E as well. Additionally, the company has made investments for taking business from consulting.
  • The margin profile for large deals is eroding due to competition. From here on, innovative solutions will drive the sustainability of margins.
  • The company expects a positive trend in both emerging and developed markets. There are lots of opportunities in manufacturing, telecom, retail, and media.

Asset Multiplier Comments:

  • Backed by deal wins in both small and big pockets and continued momentum in cloud and data, the company looks set to achieve its target of double-digit growth over FY23-24E.
  • Record employee addition of 19,400 hirings along with record low attrition of 7.2% strengthens the growth opportunity prospects over the next two years. 

Consensus Estimates (Source: market screener website):

  • The closing price of TCS was ₹ 3223/- as of 15-April-2021.  It traded at 30x/ 27x the consensus EPS estimate of ₹ 108/ 119 for FY22E/23E respectively.
  • The consensus price target is ₹ 3,401/- which trades at 29x the EPS estimate for FY23E of ₹ 119/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Not looking at a huge change in distribution : Britannia

Update on the Indian Equity Market:

On Thursday, the indices ended lower after a six-day gaining streak. The Nifty ended slightly lower at 10,029. Among the sectors, Media (+4.1%), Pharma (+2.2%), and IT (+1.9%) were the top gainers. Private Bank (-3.1%), Financial Services (-2.6%), Bank (-2.6%) led the losers. VEDL (+7.7%), BHARTIARTL (+5.7%), and ZEEL (+5.5%) led the gainers while ASIANPAINT (-4.6%), BAJFINANCE (-4.0%), and HDFC (-4.0%) ended in the red.

Britannia recently declared its fourth-quarter results. In a post-result interview, Britannia Industries MD, Mr. Varun Berry discussed distribution network, market share, and margins. Here are the edited excerpts of his interview with ET Retail on 4th June 2020:

  • Britannia has a reach of about 5.5 million outlets. During the lockdown period, e-commerce has witnessed a massive 300% growth, which is about a percentage of their total sales. In the time to go, it is expected to grow from 1% to 2% to 5%.
  • Though e-commerce is growing exponentially, there is a huge base of the supply chain pyramid which has to be kept serving. Hence, he does not believe that distribution strategies are going to change in a hurry.
  • It will remain to be a situation where you will have to service kirana stores because they are so entrepreneurial in their way, they operate that they service their own markets wherever they are in a way e-commerce would do in a large city. As long as they have the infrastructure, kirana stores will be serviced by companies like Britannia.
  • There are some strong brands where they will prefer taking a pull strategy, rather than a push strategy. A couple of years back, they had adopted a modified pull strategy which has a disastrous impact.
  • Since they are not looking at adopting the strategy in a hurry, they will continue to have direct distribution to 2.5 million-odd retailers. The strategy of servicing the wholesalers will continue. There will be a disproportionate focus and nurturing of modern trade, e-commerce, and alternate channels, but the base strategy will not change.
  • A lot of freebies have been cut out due to the lack of availability. A lot of costs from the sales and marketing system have been cut down. They will continue doing that going forward.
  • Ad spends have been cut till now. Once a normal stocking of brands starts, normal ad spends will resume. This month itself, they will get back to advertising for some of the brands once they have enough product, which will be a temporary phenomenon.
  • They will continue to nurture and build brands for the future. Since it seems everyone is sitting at home and watching television, Mr. Berry is of the opinion that it is the right time to advertise and they will start doing that.
  • Investments will be made in creating new brands and launching new products. But there is the labor shortage issue. Since migrant workers have gone back, Britannia is operating at a lower capacity in every factory. Due to this, prioritization has become important and thus they are staying away from innovations. As soon as there are sufficient workers, they will start unleashing some of the innovative products.
  • Britannia is at the operating leverage cusp and has witnessed a disproportionate jump in margins in the last quarter results. However, its sustainability after a period of time will have to be looked at. The focus will be on unearthing opportunities and making the business efficient going forward.
  • From a 4% margin seven-eight years ago to around 15% now, operating margins have certainly improved. There will certainly be progress on the margin but in a slow and steady fashion.

Consensus Estimate: (Source: market screener website)

  • The closing price of Britannia was ₹ 3,458/- as of 4-June-2020. It traded at 51x/ 45x the consensus earnings estimate of ₹ 68.0/76.8 per share for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 3,540/- implies a PE multiple of 46x on FY22E EPS of ₹ 76.8/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Corporation Bank: Margins to expand on recoveries

Excerpts from an interview of Ms P.V. Bharathi, Managing Director, and Chief Executive, Corporation Bank with CNBC-Tv18:

Update on the Indian Equity Market:

On Thursday, NIFTY closed -0.3% lower. Among sectoral indices, NIFTY Metal (-2.2%), NIFTY Auto (-1.0%), and NIFTY FMCG (-0.6%) closed lower. While NIFTY Media (+4.1%), NIFTY Realty (+0.6%) and NIFTY Financial services (+0.3%) closed on a positive note. The biggest losers were BPCL (-6.0%), Coal India (-3.4%), Tata Steel (-3.3%) whereas Zee (+11.7%), Eicher Motors (+2.1%) and Dr Reddy (+1.4%) ended with gains.

  • Speaking about Essar steel judgement Ms P.V. Bharathi said that the Essar recovery which was long pending has now come. The bank expects that by November 2019 around ₹1,300 crore will be coming in.
  • The bank had already targeted recovery of ₹ 6,000 cr, including National Company Law Tribunal (NCLT) recoveries.
  • In the Essar Steel case, the bank has already provided 100% in respect of this account, so the entire amount of recovery will help to improve profit. In this process, the net interest margins (NIMs) will also increase by 40-50 bps.
  • The bank’s exposure to Bhushan Steel is small, it is ₹150 cr. The bank has around ₹2,500 cr exposure to Videocon.
  • The recoveries will increase profit; for the first half of the year net profit was up 24%.
  • Total profit by the end of FY20 would go up to ₹2,000 cr out of which ₹1,300 cr will directly come from recoveries.
  • The NPAs are less than 6%, the bank has been able to bring it down to 5.59% and by the end of FY20, it will be near 5.3%.
  • The targeted loan growth is ₹1,30,000 cr and at the beginning of the year, it was around ₹1,20,000 cr. The bank has targeted 60% growth in RAM (Retail, Agri and MSMEs) and 40% in corporate.
  • Speaking about the merger, Ms P.V. Bharathi said that it is expected to take place from 1 April 2020, once the process of valuation is over then swap ratios will come out.
  • Ms P.V. Bharathi says this is peak period for retail home loan growth as well as vehicle growth.
  • The total exposure to private sector NBFCs is ₹4,000 cr and the  exposure to Dewan Housing Finance Corporation is around ₹500 cr.
  • The bank has factored in around ₹750 cr of slippages in third quarter, last quarter it was ₹950cr.

VIP Industries: Revenue growth target of 5-10% for next quarter as well as for the whole year

Update on the Indian Equity Market:

Markets started the week marginally higher as Nifty closed the day 5 points higher to 11,912. 6 out of 11 sectoral indices closed the day on a positive note with MEDIA (2.8%), PVT BANKS (1.4%) and BANK (1.3%) led the gains while IT (-0.5%), FMCG (-0.5%) and AUTO (-0.2) were the laggards. Among the stocks, ZEEL (6.2%), YESBANK (5.7%) and BPCL (2.8%) led the index higher whereas NESTLEIND (-2.4%), HEROMOTO (-2.1%) and HINDALCO (-2.1%) were the worst-performing stocks.

VIP Industries:  Revenue growth target of 5-10% for next quarter as well as for the whole year

Key takeaways from the interview of Mr Dilip Piramal, Chairman, VIP Industries dated 11th November 2019 published in LiveMint:

  • Mr Piramal started the interview with his remarks on the 2QFY20 performance of VIP Industries. He mentioned that though revenues were lower, EBITDA was higher due to two reasons. First, due to the implementation of IND-AS 116, the EBITDA went up by 6 basis points. Second, the company also witnessed improvement in gross margins which contributed to the EBITDA growth.
  • The company reported YoY growth of 3% in revenues. He said that he was not surprised by the lower growth in revenues as it aligns with the general trend in the economy.
  • About the revenue growth in the future, he said that things are slightly better than before. The company is looking to achieve between 5-10% growth in this quarter and for the whole year. This is lower as compared to the historical growth rate of around 25%.
  • On being asked about whether the customers are up-trading, he said that there is not much of a change. In fact, the lower end is increasing faster for about nearly one year.
  • He mentioned that there is no increase in competition for the company. The industry is very small with two bigger players and one quite small player who is very competitive in the lower end. It is more like a segment-wise competition. The competitive pressure is the same.
  • After the implementation of Goods and Service Tax (GST), the market share has moved from unorganised players to the organized players. The company achieved a growth of 25% in FY18 largely on the back of implementation of GST.

Consensus Estimate (Source: market screener website)

  • The closing price of VIP Industries was ₹ 437/- as of 11-November-19. It traded at 37x/ 30x the consensus EPS for FY 20E/ FY 21E of ₹ 11.8/ 14.6 respectively.
  • Consensus target price of ₹ 509/- implies a PE multiple of 35x on FY22E EPS of ₹ 14.6/-.