Big Bull Rakesh Jhunjhunwala of the stock market may have to reverse betting on VIPs. Market experts say that VIP Industries may be on track for under-performance and its stocks may decline. VIP Industries is one of Rakesh Jhunjhunwala’s favorite companies and holds a 5.31% stake in it, which is worth over Rs 266 crore as on date. Brokerage firms say that VIP industries cannot aggressively continue cost cutting for a long time and the recovery in the company’s revenue after Corona is also not very good.
Let me tell you that the prices of the company’s stocks have almost doubled since March low, but they are still about 50% below their August 2018 alltime high and it is expected to fall further. VIP Industries’ December quarter results have failed to excite market experts and analysts. Analysts believe that the company’s functioning is returning to track. Its margins are also reaching normal levels. However, it may still take 5 to 6 quarters to return to normal. In such a situation, its stocks may disappoint investors.
Corona was greatly killed by the company
VIP Industries chairman Dilip Piramal admitted that Corona had been beaten up considerably by the company. He said the company’s sales in the June quarter stood at just 7% compared to the pre-covid level, while reaching 25% in the September quarter and 54% in the December quarter. The company says that its fixed cost will remain at Rs 25 crore per month. Whereas, it was Rs 40 crore before Corona. Dilip Piramal said that there is no pressure on the company about the payment except the dues of Rs 35 crore on Big Bazaar. The company now sources 55% of its raw material from Bangladesh, which aims to be 100%, so as to improve the company’s margins.
What should investors do, this is the opinion of experts
Brokerage firm Yes Securities said that raw material costs in the luggage industry increased by 60 to 70%. This has also affected the company’s margins. At the same time, brokerage firm Edelweiss said that the EBITDA of the company has been positive at Rs 8.1 crore in Q3 after registering losses in two quarters. But this is much less than expected. Edelweiss has set a target price of Rs 351 for VIP Industries stocks.
At the same time, after sluggish results in the December quarter, IDBI Capital (IDBI Capital) cut VIP sales, EBITDA and Earnings on Share (EPS) estimates for FY 2020-21. The brokerage has fixed its target price at Rs 344. However, Kotak Securities reposed trust on the VIP share. The brokerage firm has given a buy rating to its stocks and a target price of Rs 400 for this. The company’s stocks closed down 0.94% at Rs 348.70 today.