This stock can make Rakesh Jhunjhunwala richer by 26%: Should you buy?
VIP has made nearly 13% jump in its market price, making many investors including Jhunjhunwala rich in just a span of 1 month.
A new buy call has been made, which is going to make big bull Rakesh Jhunjhunwala richer in near term. It would be largest luggage maker VIP Industries which has emerged as money making stock. On Tuesday, VIP share was trading at Rs 459.30 per piece up by Rs 7.05 or 1.56%. However, the stock has surged over 2%, as it has touched an intraday high of Rs 461.50 per piece. Interestingly, VIP has made nearly 13% jump in its market price, making many investors including Jhunjhunwala rich in just a span of one month. Analysts have now predicted that VIP is set to achieve Rs 579 price target, which if compared with current levels will result in over 26% rise.
Jinesh Joshi analysts at Prabhudas Lilladher said, ‘’We initiate coverage on VIP Industries Ltd (VIP) with a BUY rating given market leadership (~50% revenue share) in the organized luggage industry, well-diversified product portfolio (six brands and multiple SKUs exceeding 1,500) and solid brand salience (brand-ex is ~5-7% of sales).”
Also, Joshi believes, strong distribution network (~11,000 touch points), GST implementation (narrowed pricing gap with unorganized players resulting in up-trading) and entry into the under penetrated ladies hand bags and backpack market is likely to drive sales/PAT at a CAGR of 23.7%/25.1% over FY18-21E.
Although headwinds from currency & crude volatility prevail, Joshi stated that product premiumisation (rising share of Caprese and Carlton) and increase in production from captive facilities at Bangladesh will aid in 40bps EBITDA margin expansion over FY18-21E.
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“We expect premium valuations (32.7x FY20E and 25.3x FY21E) to sustain given strong growth prospects, debt free BS, high return ratios (RoE/RoCE of 25.6%/36.9% in FY18; to expand by 230bps / 310bps over FY18-21E), and healthy dividend pay-out (average 41% over last 5 years). Initiate with a BUY and TP of Rs579," he said.
Jhunjhunwala is among largest public shareholder in VIP Industries. He holds about 3.69% stake in VIP with 5,215,000 shares worth Rs 236.5 crore currently. Hence, VIP’s uptrend ahead, will add more money in Jhunjhunwala’s kitty.
In Q3FY19, an improvement has been witnessed in Jhunjhunwala’s wealth, bouncing back to Rs 13,173.53 crore - a rise of over Rs 2,300 crore compared to previous quarter. VIP has been among best performing stocks for Jhunjhunwala since last year.