New shore in branded apparel… Monte Carlo Fashion Ltd - SUBSCRIBE to the IPO : ICICI Securities

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
New shore in branded apparel…
Monte Carlo Fashion Ltd (MCFL) was launched in 1984 as an exclusive
woollen brand by Oswal Woollen Mills Ltd (OWML). The “Monte Carlo”
brand has been awarded “Superbrand” in the woollen knitted apparel
segment since 2004. The domestic winter wear market of nearly $2.3
billion is growing at 9% CAGR. Going ahead, the segment is expected to
grow at 7% and 12% in terms of volume and value, respectively, over
2012-17. MCFL being a leading player in the largely unorganised Indian
winter wear segment is well poised to capture the growth. Revenues
grew at a CAGR of ~16% in FY12-14 whereas earnings grew at 6% CAGR
over the same period. Buoyed by a diversified product range along with
strong in-house design & raw material sourcing, we expect MCFL to
register revenue, PAT CAGR of 16%, 18%, respectively, in FY14-17.
Investment rationale
Strong brand, diversified product portfolio create competitive advantage
“Monte Carlo”, since its inception, has created a strong brand recognition
for itself in the northern and eastern part of the country, which forms
nearly 85% of the winter wear market. “Monte Carlo”, being the flagship
brand of the company, has a diverse product portfolio in the high and
mid-premium woollen apparel segment. The company extends the brand
to the cotton apparel segment as well, thereby leading to an increase in
the product offering. The company has a presence in men’s, women’s
and kids apparel. Going ahead, cotton garments along with fabric and
home furnishing segment are expected show significant scope of growth.
In-house sourcing, asset light model provide comfort
MCFL sources ~95% of its woollen yarn from its sister concern OWML,
thereby eliminating the risk of supply/price shock for the company.
Further, for its cotton garment segment, MCFL follows an asset light
model, whereby it sources the fabric from outsourced players. Further,
with 196 EBOs and more than 1300 MBOs MCFL plans to provide
nationwide distribution & coverage for both woollen and cotton apparel.
Nascent branded apparel segment offers ample scope for growth
At the IPO price band of | 630-645, MCFL trades at 25x FY14 EPS of |
25.4. However, given lack of branded apparel in woollen segment and
possibility of a shift from unorganised to organised in apparel segment,
we envisage earnings CAGR of 18% in FY14-17E, making valuations
attractive for MCFL. Hence, we recommend SUBSCRIBE to the IPO

link
http://www.moneycontrol.com/news_html_files/broker_report/2014/02014Dec-01011214.pdf