VIP Industries Q4FY21 ConCall Summary

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Business Updates

  • Travel Tourism industry returned to 70-75% level in Q4 as compared to last year
  • Q4FY21 Revenue at Rs 243 crore vs Rs 311 crore YoY
  • Q4FY21 Loss at Rs 3.8 crore vs PAT of Rs 9.5 crore YoY
  • Revival matrix was 64% in Q3, 25% in Q2 and near 7% in Q1
  • One of the largest account, “Big Bazaar” operating at sub optimal level as compared to the rest of the modern trade largely due to Reliance-Big Bazaar deal
  • Gross margin has improved to 47% in Q4 from  40% QoQ; however it continue to be significantly lower than last year
  • One of the key raw material, “Polycarbonate abs” currently trading at 2.3-2.5x to pre-Covid level
  • Fixed cost for the quarter at Rs 103 crore vs Rs 146 crore YoY. Though fixed cost is higher on sequential basis largely due to reinstatement of salary reduction. Structural cost reduction to the tune of Rs 80-90 crore at annualized level will be sustained 
  • Gross margin for full year at 45% vs 53% YoY
  • Fixed cost for full year at Rs 318 crore vs Rs 614 crore
  • Bangladesh operation has significantly scaled up
Also Read on FinMedium:  Concall Summary: Rallis India Q4FY20

Participants

  • Spark Capital
  • Ambit
  • Prabhudas Lilladher
  • HDFC Mutual Fund
  • Motilal Oswal Asset Management
  • Kotak
  • Motilal Oswal
  • GreenEdge
  • B&K Securities
  • Nippon Asset Management

QnA

  • People are buying more hard luggage than soft luggage 
  • VIP has done everything to reduce the overall cost structure. Margin should be back to previous level or even better once demand normalized
  • Insurance money likely to come in 3-4 months; due to lockdown offices are closed
  • VIP shuts down around 100 stores (EBO) last year
  • Company is in talks with land lords for waiver and reduction in rent for short term
  • Employee cost for the quarter doesn’t have incentive and other cost. VIP to continue with current employee base
  • Large part of production base has been shifted to Bangaldesh
  • Gross margin has come down largely due to discounts company is currently offering
  • VIP has taken two rounds of price increase, one in March and another in April but not across the board
  • Total fixed cost savings for the year was Rs 171 crore, out of that 50% is sustainable
  • VIP can manage the earlier peak revenue with current stores and employee base
  • Product mix has been changed in favor of value portfolio in FY21. This value segment is growing faster
  • Company has lost market share in last two years and currently working on to get it back
  • Bangladesh has about 15% cost advantage over China
  • Smaller cities likely to revive faster than larger cities post lockdown
  • Earlier 70% of sales were soft luggage and entirely imported from China. Bangladesh capacity now can cater the entire demand and if required company can expand the capacity in Bangladesh
  • Debt at Rs 150 crore (NCDs). NCDs will mature in July and September; NCDs will be repaid at maturity  
  • Current import duty from China at 15% and there is no duty on import from Bangladesh
  • Almost 17% sales came from e-commerce in FY21
  • Capex for year would be around Rs 15-20 crore for enhancing capacity

Karan Sharma

Karan Sharma

The Concall Summary Guy | CFA | Investor
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