Ace investor Rakesh Jhunjhunwala is sitting on a profit of Rs 18 crore from his investment in VIP Industries stock in the last one month. At the end of June quarter this year, Jhunjhunwala held 18.33 lakh shares or 1.30% stake in the luggage and travel accessories firm. On August 23, 2019, VIP Industries share price stood at Rs 374.25 on BSE. August 24 and August 25 were market holidays (Saturday and Sunday).
The value of Jhunjhunwala's shareholding on August 23 stood at Rs 68.62 crore. On September 25, VIP Industries stock closed at Rs 472.40 valuing his shareholding in the Mumbai-based company at Rs 86.62 crore.
VIP Industries share price has seen a rise of 98.15 points or 26% in last one month (21 trading sessions) translating into a profit of Rs 18 crore for the ace investor during the period. Rs 18-crore profit spread into 21 trading sessions translates into an average profit of Rs 85.71 lakh per day for the big bull of Dalal Street. However, the mid cap share has gained 6.5% during last one year and lost 5.62% since the beginning of this year.
VIP Industries clocked a 36% rise in net profit to Rs 35 crore for the quarter ended June 30, 2019 compared to Rs 25.28 crore for the quarter ended March 31, 2019. Its total income also rose 30% to Rs 566.77 crore in the first quarter compared to Rs 436.95 crore during the quarter ended March 31, 2019.
The Mumbai-based firm is buoyant on its performance in the current fiscal despite the ongoing economic slowdown. In the beginning of this month, the firm said it was targeting a growth of 9-10 per cent in the 2019-20 fiscal, despite economic headwinds slowing demand.
"Slowdown has started to pinch us. We will be happy if we register 9-10 per cent growth this fiscal," managing director Sudip Ghose said. He added that the company was expecting growth at a time when many other sectors are staring at de-growth. VIP Industries grew at 26 per cent last fiscal to Rs 1,784 crore, and at 9 per cent in the first quarter of 2019-20.
Kotak Securities in a note on September 13 was upbeat on the prospects of luggage industry. The brokerage said slowdown in consumption was unlikely to affect the luggage industry, which was fairly under-penetrated.
Excluding the current turmoil in aviation sector, the travel and tourism industry in India has mostly experienced strong growth which is a boon for the luggage industry. The luggage industry should continue growing at 15% every year, with backpacks growing at about 25% and handbags growing at about 20%.
Correction in crude prices, crude derivatives and other raw material inputs bodes well for VIP Industries, the brokerage said.
It gave a buy rating to the stock with unchanged price target of Rs 515 valuing the stock at 37 times FY'21 estimated earnings.
"We consider FY19 to be an exceptional year where the company has revamped its operations, taken initiatives to reduce cost and made efforts to improve brand image and visibility.
For VIP, we continue to estimate a revenue CAGR of 11% and earnings CAGR of 19% over FY19 to FY21E with strong operating margins and return ratios. The stock has corrected by more than 15% since our last update and provides an opportunity to invest in this high growth stock," the brokerage added.
Edited by Aseem Thapliyal