Promising Investment Opportunity in Innerwear Manufacturing Sector
A detailed overview of a company in the innerwear manufacturing sector with significant growth potential. The company offers a wide range of products catering to different segments of the market, with a focus on increasing margins through premium brands. Strong financial performance, strategic growth targets, and efficient manufacturing processes make this company a compelling investment opportunity.
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This is not a buy/sell recommendation. I am not a sebi registered analyst/advisor. Anyone contemplating taking any action on the stock idea in question should do so after their due diligence or after taking advice from their financial advisor. The stock idea has been presented for purposes of discussion. I hold the stock in question in my personal portfolio.
CMP 1300 MARKET CAP 3290 CRORES. COMPARABLE PEER PAGE INDS CMP 20800 WITH MARKET CAP OF 22500 CRORES. COMPANY HAS MANUFACTURING FACILITIES AT AGARPALA, DHULAGARH, BT ROAD, TIRUPUR, LUDHIANA AND A DREAM PROJECT AT DANKUNI WEST BENGAL. PROMOTERS HOLD 73.71 % STAKE.
ADDRESSALE MARKET IN MALE AND FEMALE INNERWEAR MARKET IN 2015 WAS 24000 CRORES EXPECTED TO GROW TO 47000 CRORES BY 2020. PER CAPITA INNERWEAR SPEND EXPECTED TO DOUBLE TO RS 300. PURPOSE SPECIFIC INNERWEAR PICKING UP E.G SPORTS, FASHION, CASUAL - LEISURE
ECONOMY SEGMENT LUX VENUS VESTS AND BRIEFS, LUX KARISHMA PANTIES, CAMISOLE, LEGGIES, LUX COTSWOOL THERMALS MID PREMIUM SEGMENT LUX COZY BIG SHOT PREMIUM TRUNKS, LUX TOUCH PANTIES, CAMISOLE, LEGGIES, LUX COZI GLOW COLLECTION, LUX INFERNO QUILTED THERMALS, LUX COZI INNERWEAR PREMIUM ONN, ONE 8
COMPANY HAS A WIDE PRODUCT RANGE FROM RS 38 TO 1350 WITH OVER 5000 SKU. LUXURY BRAND ONN HAS BEEN GROWING OVER 30% CAGR. COMPANY S STRATEGY TO INCREASE CONTRIBUTION FROM PREMIUM BRAND AND THEREBY INCREASE MARGINS. MARGINS HAVE IMPROVED FROM 4% IN FY 13 TO 10% IN FY 19. OPM DURING SAME PERIOD HAVE GONE UP FROM 6% TO 15% WITH CONSISTENT INCREASE IN MARGINS.
ECONOMY REVENUE 34% EBIDTA 8-10% MID PREMIUM REVENUE 45% EBIDTA 13- 15% PREMIUM REVENUE 21% EBIDTA MARGIN 15-18% COMPANY TARGETS TO GROW THE PREMIUM SEGMENT AT A CAGR OF 30% CAGR OVER NEXT 2-3 YEARS.
COMPANY IS ONE OF THE LOWEST COST MANUFACTURERS WITH 100% CUTTING AND KNITTING DONE IN HOUSE STITCHING IS OUTSOURCED THEREBY KEEPING THE EMPLOYEE BASE LOW. COMPANY MANUFACTURED 20 CRORES PIECES OF INNERWARE IN A YEAR WHICH IS THE LARGEST FOR ANY INDIAN INNERWEAR COMPANY.
COMPANY HAS 950 PLUS DISTRIBUTORS AND SOME WITH RELATIONSHIP OVER 35 YEARS. 160 LARGE FORMAT STORES WHICH ENABLE TO SHOWCASE ENTIRE PRODUCT RANGE AND PORTFOLIO UNDER SINGLE ROOF. 9 EXCLUSIVE BRAND OUTLETS IT IS ONE OF THE FEW INNERWEAR COMPANIES IN INDIA TO ORGANISE DISTRIBUTOR & OWNER CONFERENCE IN AND OUTSIDE INDIA.
COMPANY HAS A PAN INDIA DISTRIBUTION WITH STRONG PRESENCE IN WESTERN AND CENTRAL INDIA WITH HIGHEST ABSOLUTE SALES FROM MP, UP AND UTTARAKHAND. EXPORTS TO 47 COUNTRIES LARGELY MIDDLE EAST, AFRICA, EUROPE AND AUSTRALIA. SALES FOCUSSED IN TROPICAL COUNTRIES WITH DEMOGRAPHICS SIMILAR TO INDIA.
LUX OVER THE YEARS HAS ROPED IN CELEBRITIES TO ENDORSE ITS BRANDS. THEY INCLUDE SRK, SUNNY DEOL, VARUN DHAWAN, AMITABH BACHCHAN. ONE 8 IS A TIE UP WITH VIRAT KOHLI. LUX S PROFIT FROM EVERY RUPEE INVESTED IN BRAND SPEND INCREASED FROM 5.74% TO 7.47% IN FY 19. COMPANY HAS SUSTAINED BRAND INVESTMENTS AT 8% OF TURNOVER. SPENT 109 CRORES IN FY 18 AND 91 CRORES IN FY 19.
FY 19 REVENUES AT 1218 CRORES VS 1079 CRORES IN FY 18, INCREASE OF 13%. EBIDTA INCREASED 21% TO 189 CRORES. NET PROFIT INCREASED TO 101 CRORES FROM 78 CRORES AN INCREASE OF 30% EBIDTA MARGINS IMPROVED FROM 14.5 % TO 15.6% AND PAT MARGIN FROM 7.2 TO 8.3%. FY 19 EPS AT 40 PER SHARE VS 31 FOR FY 18.
LONG TERM DEBT AT 5.3 CRORES AND SHORT TERM DEBT AT 173 CRORES (DOWN FROM 316 CRORES IN FY 18) SINCE FY 13, REVENUES HAVE GROWN AT 9% CAGR, PAT HAS GROWN AT 31% CAGR AND EBIDTA MARGIN HAVE IMPROVED FROM 6.3 TO 15.6% AND NET PROFIT MARGINS HAVE IMPROVED FROM 2.9% TO 8.3%. FY 19 ROE 24.5%, ROCE 30% AND NET DEBT TO EQUITY 0.4%
JM HOSIERY REVENUE INCREASED FROM 293 CRORES IN FY 18 TO 328 CRORES IN FY 19. EBELL FASHIONS REVENUES INCREASED FROM 198 CRORES IN FY 18 TO 254 CRORES IN FY 19. BOARD OF DIRECTORS HAVE APPROVED THE SCHEME OF ARRANGEMENT OF MERGER OF THESE TWO COMPANIES WITH LUX. REGULATORY APPROVALS AWAITED.
TO ACHIEVE TURNOVER OF 1500 CRORES HAVING 13-15% CAGR. MAINTAIN SUSTAINABLE GROWTH IN EBIDTA MARGIN OF 100-150 BPS. CONSTANTLY ADD NEW AND INNOVATIVE PRODUCTS TO GAIN SIGNIFICANT MARKET SHARE AND CAPTURE MORE EXPORTS FROM VARIOUS COUNTRIES.
GOOD OPPORTUNITY SIZE FOR A DECENT COMPANY. PREMIUM SEGMENT GROWTH TO HELP CONTINUE MARGIN IMPROVEMENT. COMPANY HAS CONTINUED TO LAUNCH NEWER PRODUCTS AND CREATE NEW CATEGORIES LEADING TO EXPANSION OF ADDRESSABLE MARKET. FOR A COMPANY WITH GOOD MANAGEMENT AND DECENT OPP SIZE, VALUATIONS ARE REASONABLE. CAN BE SOME RERATING IF GROWTH CONTINUES. RISKS CAN BE SLOWDOWN IN CONSUMPTION, HIGHER TAXES.
