VIP Industries: A Dismal Q1FY14 Scorecard

VIP Industries announced its Q1FY14 result on July 31. The company has posted weak numbers for the period over that in the previous fiscal corresponding quarter. The topline saw a growth of 8% to Rs 327 crore in June quarter on yearly basis. The other operating income too registered flat growth at just Rs 1.1 crore.

Contrary to this, the operating expenses went up heavily to Rs 288 crore, 11% higher than that in the June 2012 quarter. Due to the increase in raw material costs, its raw material consumption expenses increased by 6%. The company's stock-in-trade purchase has moved up by 13% to Rs 92 crore. Its other expenses, which includes administrative costs, advertising and selling costs, have also risen by 18% to Rs 67 crore. During the quarter, the increase in rebates offered by the company to its clients has led to higher rebate and discounts costs.

The heavy rise in operating expenses has also impacted the EBITDA, which dropped by 10% to Rs 39 crore. Although, it saw a decline in both depreciation cost and finance expenses on a YoY basis in the June quarter, the company reported a fall of 2% in its net profits, which came in at Rs 23 crore.

Its operating margins were also hit, going down by 241 basis points to 11.96%. This resulted from the increase in its overall expenditure. The forex gains have come down to Rs 70 lakh from Rs 3.5 crore in Q1FY13. This affected the net margins by 73 basis points, and this stood at 7.04%.

Currently, VIP Industries' stock is trading at a TTM PE of 22.4x. Reacting to the poor performance in the elapsed quarter, its share price has declined by 7.5% to Rs 44 on August 1.