Академический Документы
Профессиональный Документы
Культура Документы
November 7, 2012
Cravatex
Strategic partnerships to be key driver
Y/E March (` cr) Total operating income EBITDA EBITDA Margin (%) Adj. PAT
Source: Company, Angel Research
BUY
CMP Target Price
2QFY12 54 5 9.1 3 % chg (yoy) 3.7 9.7 53bp (5.4)
`456 `545
12 Months
2QFY13 56 5 9.6 3
1QFY13 58 4 6.4 2
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
Trading 116 24.3 0.5 799 / 388 859 10 18,902 5,760 CRAV.BO CRAV.IN
Cravatex reported a marginally higher top-line of `56cr yoy on a consolidated basis, vis--vis our estimate of `70cr. On the operating front the EBITDA grew by 10% yoy to `5.4cr. Other expenses as a percentage of sales reduced by 406bps which were offset by a total 334bps increase in raw material and employee cost as a percentage of sales, thus leading to expansion of EBITDA margin by 53bps to 9.6%. The company reported a bottom-line of `2.9cr, lower by 5.4%, yoy vis-vis our estimate of `2.1cr.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 75.0 1.9 0.3 22.8
3m 6.9 12.4
1yr 7.6
3yr 14.6
(5.2) 490.2
FY2010 58 32.2 4 98.7 5.2 14.4 31.7 6.6 20.7 8.9 2.2 41.8
FY2011 97 66.4 6 73.6 7.5 25.0 18.2 5.0 27.3 14.8 1.5 19.7
FY2012 245 151.6 10 50.9 7.6 37.7 12.1 3.7 30.3 26.0 0.6 7.8
FY2013E 272 11.2 10 (0.5) 7.2 37.5 12.1 2.9 23.7 23.8 0.5 7.4
FY2014E 308 13.3 12 21.2 7.3 45.4 10.0 2.3 22.7 24.5 0.5 6.4
56.2
33.9
57.8
36.5
(2.8)
(7.1) 2.1 (7.0) (6.2)
54.2
31.2
3.7
8.6 13.6 (13.6) 3.1
114.1
70.4
98.7
59.1
15.6
19.2 23.7 7.6 16.8
60.3
5.5
63.1
5.4
57.6
4.8
61.7
10.9
59.9
8.8
9.8
11.4
9.3
12.3
8.9
13.2
9.5
23.7
8.9
22.0
20.3
50.8
21.2
54.1
24.3
49.3
20.7
104.9
22.3
89.8
5.4
9.6
3.7
6.4
46.6
325bp
4.9
9.1
9.7
53bp
9.1
8.0
8.8
8.9
3.3
(96)bp
1.1
0.3
1.0
0.3
7.6
(0.7) 70.2 47.8 80.2
0.6
0.3
1278.3
5.8 (2.6) 5.9 (5.4)
2.2
0.6
1.3
0.6
62.6
11.9 (8.8) (8.0) (9.1)
0.0
4.0
0.0
2.3
0.0
4.1
0.0
6.3
0.0
6.9
7.1
1.1
4.1
0.7
7.6
1.0
5.6
1.8
7.0
2.0
26.8
2.9
30.9
1.6
24.6
3.1
28.3
4.5
28.1
5.0
5.2
2.8
5.7
4.0
5.1
November 8, 2012
(` cr)
(` cr)
(%)
40 30 20 10 0
100 50
2.8
3.2
3.0
3.9
4.9
5.4
4.2
3.7
24
26
24
44
54
85
61
58
56
30
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
Revenue (LHS)
EBITDA (LHS)
Investment arguments
Extended sub-license agreement for 30 years with FILA
FILA is a 100-year old Italian sportswear brand with a strong parentage in sports apparel, sports accessories and sports footwear industry. Cravatex represents FILA in India and distributes its products under the license agreement which has been further extended for 30 years starting from January 2013. The license permits the distribution of FILA products and use of its trademark in India, Bangladesh, Pakistan, Sri Lanka, Nepal and Bhutan. Further, the agreement requires Cravatex to invest 4-5% of the revenue on marketing activities. Cravatex has been currently distributing the FILA products largely in wholesale, shop-in-shop and retail formats but now plans to focus on own-store formats. Besides being present in over 1,200 footwear stores, 200 apparel outlets and over 25 mono brand FILA stores pan India, FILA has further plans to be present in almost all large retail formats such as Shoppers Stop, Westside and Lifestyle. FILA aims to more than double its stores to 100 in the next two years and thereby double its market share by 2015 from the current 5%. Kim Clijsters, US open singles champion is the brand ambassador for FILA.
2QFY13
5.4
(%)
50
November 8, 2012
Financials
Exhibit 5: Key assumptions
Particulars (%) Total revenue growth Sportswear segment Volume growth Change in price/unit Revenue growth Fitness equipment segment Volume growth Change in price/unit Revenue growth
Source: Angel Research
Revenue from the fitness equipment segment is expected to grow at a CAGR of 14.7% over FY2011-14E to `133cr in FY2014E on the back of new strategic alliances with Polar Electro OY (Finland) and Miha Body Tec (Germany), and on expansion plans of health club chains such as Talwalkars and Gold Gym to whom the company provides fitness equipments. Also, Cravatex plans to expand its existing network of retail stores, which will provide it greater visibility among retail consumers. In case of the sportswear segment, revenue is expected to grow at a CAGR of 12.3% over FY2011-14E to `172cr in FY2014E, owing to acquisition of the sublicense for distribution through specified channels in the UK and Ireland. It is also expected that the retail-led approach of FILA along with the governments potential reform to allow up to 51% FDI in the retail sector will enhance the companys earnings.
November 8, 2012
(`cr)
150 100 50 0
(` cr)
2 0
(2) (4)
EBITDA (LHS)
Source: Company, Angel Research
November 8, 2012
(%)
12
(%)
200
Despite an enhanced top-line and improved operating performance, the net profit of the company is expected to post a CAGR of 9.8% over FY2012-14E, from `10cr in FY2012 to `12cr in FY2014E.
(` cr)
November 8, 2012
(%)
Price
Source: Company, Angel Research
6x
12x
18x
24x
Company Background
Cravatex is a trading company and mainly operates in two segments a) distribution of fitness equipment (reduced from 49% in FY2007 to 40% in FY2011) and b) distribution of sports footwear and apparel of the brand FILA (increased from 24% of the total revenue in FY2007 to 56% in FY2011). The company is a market leader (28% market share of organized sector) in providing fitness equipment distribution under its brand Proline Fitness and represents the 100-year old Italian brand, FILA, in India. Cravatex has acquired sub-license to distribute the products of FILA in the United Kingdom (UK) and Ireland through wholly owned subsidiary, BB Ltd. It also provides sourcing services to several FILA licensees across the world including Middle East and Africa. The company has also been forming strategic partnerships with various health club chains in India such as Talwalkars and Gold Gym in the fitness equipment segment. Cravatex issued bonus shares in the ratio of 1:1 by capitalizing the subsequent amount from the general reserve account of the company in July 2011.
November 8, 2012
Concerns
High cost of equipment
India does not have quality equipment manufacturers due to which majority of the equipment are been imported (largely from USA). The duty structure on imported equipment is around 23%. Thus, considering the original cost of fitness equipment, import duties inflates their cost, which further leads to higher fixed cost for both individuals and institutional consumers.
Euro slowdown
The companys subsidiary in the UK which was recently acquired by Cravatex is expected to deliver a potential annual revenue of around 10mn in two years. This revenue potential may be adversely impacted due to recent slowdown in the Euro zone.
Currency Impact
Cravatex imports most of its equipment from outside the country. Rupee depreciation will make imports expensive and increase the cost of acquiring the equipment. High procurement cost will thereby impact the margins of the company.
November 8, 2012
November 8, 2012
10
November 8, 2012
11
FY2011 9 1 (0) (14) (3) (6) (2) (3) 0 (5) 0 9 (1) 1 10 (1) 2 1
November 8, 2012
12
FY2010 31.7 26.5 6.6 0.5 2.2 41.8 3.7 14 14 17 2 69 4.0 0.5 2.2 4.7 3.3 0.5 5.4 6.6 8.9 20.7 3.0 59 70 110 95 0.5 3.1 2.7
FY2011 18.2 16.1 5.0 0.6 1.5 19.7 3.0 25 25 28 3 92 6.6 0.7 2.3 10.3 6.1 0.7 13.4 13.4 14.8 27.3 4.3 60 81 97 94 0.7 2.5 3.9
FY2012 12.1 10.9 3.7 0.9 0.6 7.8 2.1 38 38 42 4 124 7.0 0.7 3.7 17.7 8.9 0.8 24.6 25.0 26.0 30.3 10.6 39 75 104 94 0.8 1.4 4.6
FY2013E 12.1 10.9 2.9 0.9 0.5 7.4 1.8 37 37 42 4 158 6.8 0.7 3.5 16.2 9.8 0.7 20.5 23.0 23.8 23.7 10.7 49 75 104 78 0.7 1.4 4.1
FY2014E 10.0 9.1 2.3 0.9 0.5 6.4 1.6 45 45 50 4 200 7.0 0.7 3.5 16.6 9.8 0.5 20.2 23.6 24.5 22.7 11.6 47 75 104 80 0.5 1.2 4.8
November 8, 2012
13
E-mail: research@angelbroking.com
Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Cravatex No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns):
November 8, 2012
14