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http://content.icicidirect.com/mailimages/ICICIdirect_IndianInnerwearSector_InitiatingCoverage.pdf
U p s i d e p o t e n t i a l p r i c e d i n …
Lovable Lingerie (Lovable), a major player in the women’s innerwear
industry has a strong bouquet of brands and sub-brands under its fold
catering to the women’s premium and mid-premium segment. Presence
in the fastest growing segment among the innerwear industry provides it
an opportunity to grow at a rapid pace. Leveraging its strong brands and
favourable industry dynamics like shift in consumer preference towards
branded products and higher aspirational buying from women owing to
increased PROPORTION of working women, we expect Lovable to
outpace the industry growth.
Presence in fastest growing segment
The women’s innerwear market is expected to outperform the Indian
apparel industry growth (10.6%) and grow at a CAGR of 15% over 2009-
2020E. Historically, Lovable has been consistently growing at a more
rapid pace than the women’s innerwear industry growth. We expect it to
continue with the growth momentum, going ahead.
Financials set to improve
A strong brand bouquet and continuous expense on increasing brand
awareness would enable Lovable to leverage the industry demand and
register 24.0% revenue CAGR over FY11-FY14E to | 198.4 crore.
Improvement in EBITDA margin after FY12E would enable the company
to report a 28.8% CAGR in net profit over FY11-14E to | 30.1 crore leading
to an improvement in RoCE from 12.8% in FY11 to 18.4% in FY14E.
Debt free status provides organic and inorganic growth opportunities
Lovable’s debt free status would enable it to raise finance on favourable
terms for financing either organic or inorganic growth in future. With
robust cash generation and a debt free status, the company can scout for
acquisitions in similar or newer related lucrative segments to enhance its
product portfolio and cater to a larger segment of the apparel industry.
Valuations
We have valued Lovable at a 15% discount to Page Industries’ valuation
multiple (23.0x FY14E EPS) considering the lower return ratios and
marginally lower operating margin. Based on 19.6x FY14E EPS of | 17.9,
we have arrived at a target price of | 350. We are initiating coverage on
Lovable Lingerie with a HOLD rating. At the CMP, the stock is trading at
25.2x and 19.6x its FY13E and FY14E EPS of | 13.9 and | 17.9,
respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_IndianInnerwearSector_InitiatingCoverage.pdf
U p s i d e p o t e n t i a l p r i c e d i n …
Lovable Lingerie (Lovable), a major player in the women’s innerwear
industry has a strong bouquet of brands and sub-brands under its fold
catering to the women’s premium and mid-premium segment. Presence
in the fastest growing segment among the innerwear industry provides it
an opportunity to grow at a rapid pace. Leveraging its strong brands and
favourable industry dynamics like shift in consumer preference towards
branded products and higher aspirational buying from women owing to
increased PROPORTION of working women, we expect Lovable to
outpace the industry growth.
Presence in fastest growing segment
The women’s innerwear market is expected to outperform the Indian
apparel industry growth (10.6%) and grow at a CAGR of 15% over 2009-
2020E. Historically, Lovable has been consistently growing at a more
rapid pace than the women’s innerwear industry growth. We expect it to
continue with the growth momentum, going ahead.
Financials set to improve
A strong brand bouquet and continuous expense on increasing brand
awareness would enable Lovable to leverage the industry demand and
register 24.0% revenue CAGR over FY11-FY14E to | 198.4 crore.
Improvement in EBITDA margin after FY12E would enable the company
to report a 28.8% CAGR in net profit over FY11-14E to | 30.1 crore leading
to an improvement in RoCE from 12.8% in FY11 to 18.4% in FY14E.
Debt free status provides organic and inorganic growth opportunities
Lovable’s debt free status would enable it to raise finance on favourable
terms for financing either organic or inorganic growth in future. With
robust cash generation and a debt free status, the company can scout for
acquisitions in similar or newer related lucrative segments to enhance its
product portfolio and cater to a larger segment of the apparel industry.
Valuations
We have valued Lovable at a 15% discount to Page Industries’ valuation
multiple (23.0x FY14E EPS) considering the lower return ratios and
marginally lower operating margin. Based on 19.6x FY14E EPS of | 17.9,
we have arrived at a target price of | 350. We are initiating coverage on
Lovable Lingerie with a HOLD rating. At the CMP, the stock is trading at
25.2x and 19.6x its FY13E and FY14E EPS of | 13.9 and | 17.9,
respectively.
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