Saturday, February 22, 2014

CRAVATEX LTD - BUY

                                 


                                                                                             

------------------------------------------------------------------------------------------------------------------------------













-----------------------------------------------------------------------------------------------------------------------------


  




                                                              


















  --------------------------------------------------------------------------------------------------------------
Companies owned Indian franchise of reputed international consumer brands commanding premium valuations in Indian Stock Market .Page Industries and Jubilant Foodworks are best examples for this trend which owns the Indian rights of JOCKEY and DOMINOS PIZZA. This week let us look into another stock which can be classified in this category- Cravatex. This BSE listed micro cap owns the Indian marketing rights of more than one established International brands in India

# Company owns the long term exclusive rights to market famous Italian  sportswear brand FILA in India Sri Lanka, Nepal, Bhutan , Pakistan,Middle East and North Africa.This reputed international brand claiming 5 % market share in 2000 cr sportswear market in India which is growing 12-15 % per annum . Currently company is operating mainly through shop-in-shop formats and retail stores .Cravatex renewed exclusive license for another 30 years in 2012 for selling FILA brand in India  .After signing this long term agreement now company is planning aggressive expansion and as part of this it will add more than 60 exclusive stores in next two years to reach its number 100 .Company targeting a market share of 10 % by end of 2015 by this expansion and other marketing efforts.Company selling footwear and apparels under FILA brand in  India.

# Another international brand brought by Cravatex into India is ‘Wilson’ .Company tied up with Amer Sports (Finland) for exclusive distribution rights for the ‘Wilson’ sport  equipments which includes balls and other equipments for Tennis,Golf,Basket Ball ,Badminton,Squash..etc.


#  The most successful association ( FILA  business is  just developing) of Cravatex is with Johnson Health Tech  which is the third largest fitness company in the world.Company having exclusive license to use the brands of Johnson  Health Tech for various types of fitness equipments  like Treadmills,Cycles and various types of strength exercise equipments.There products are selling under brands like ‘Horizon’,Magnum ,Matrix,Johnson..etc. .Cavatex  is the market leader in fitness equipments through its ‘Proline’ brand fitness equipment shops with more than 50 exclusive show rooms.It is planning to add another 50 stores in next two years . Company having strong relations with well known heath club chains like Gold Gym ,Talwalkers ..etc for supplying most modern fitness equipments. Company also offering services for establishing Gyms on a turnkey basis. Company is now aggressive in tapping the vast potential of fitness equipments to be used in home.

In addition to these licensing agreement with world renowned brands ,company’s UK based  100 % subsidiary BB UK owns the rights to design ,source and supply  FILA products to Europe, United Kingdom, and Ireland.


Financials

Past five year financial performance is summarized in the below table.







Conclusion


In recent years ,company’s performance affected due to recessionary conditions  both in India and abroad.On a stand alone basis ,for the nine months of this year company reported a net profit of Rs.3 Cr and an EPS of Rs.11 .Consolidated figures will be available on completion of full year. In the past 3 years company’s stock price corrected from a level of Rs.800.Low liquidity may be a reason for this sharp fall. All these businesses having good potential and enjoys some sort of niche positioning .Considering the growth of life style diseases among Indian youth ,potential for fitness equipments business is very large especially in home segment.Company is all set to tap this vast potential and enjoying the peer company status with good sales and service network across the country.Revival in western economies and a possible peaking out of interest rate in our country are expected to change the demand scenario of company’s products.Recent renewal of licensing agreement with long tenure ( for FILA brand) will help the company to take aggressive expansion and marketing efforts. In the past two years , time was very challenging for the company due to lower disposable income of people . But from  investor's perspective ,this temporary blip is an opportunity to get into quality low liquid stocks at attractive valuation with a long term view .As I mentioned above ,low liquidity may be a reason for sharp fall in share price from higher level but the same low liquidity may push this stock to unexpected higher  levels once the situation improves.Latest December quarter result showing some early signs of improvement and ,for those having some risk appetite ,this is the right time to enter in it @ CMP of Rs 240  which is near to its three year low. ( Three year High- Low is Rs.799 - Rs.180  post bonus)

Stock listed only in BSE 

Link to Company website HERE

Link to Latest Annual Report HERE


News Related with Company Link 1 ,  Link 2 
______________________________________________________________
Since this stock is not very popular, herewith I am giving the link of one old research report on it by a broking form.( Buy recommendation initiated when its share price was  @ Rs.655) .I hope this will help you in your efforts to get a deep idea about this company .

Link HERE
_______________________________________________________________________





                                                                              


Disc: It is safe to assume that , I have vested interest in Cravatex

53 comments :

  1. Sir
    don't you think since company is importing then RE dep is a -ve for the company?
    since you are more emphasizing on export company, how this will work for the company?

    ReplyDelete
    Replies
    1. That was the major factor affected company's margin in last year.But now , based on improving CAD ,possibility of a comparatively better election out come ,peaking out of interest rate cycle ..etc ,I believe Rupee will show consistency in future.

      Delete
  2. Sir not received reply several times of my queries now please reply . I have hundustan construction ltd share and i want to sell this share at cmp and entered in your pick what is your view about this and let me know in which stock from your recommended stock can i buy for one year to 18 months thanks in advance

    ReplyDelete
    Replies
    1. Please don't expect repeated reply for questions answered for same company .It is practically very difficult .Many times I replied that I am not tracking HCC

      Delete
  3. Sir,
    Promoters hold around 75% stake in this company. Don't you think this is not a good sign for retail investors.

    ReplyDelete
    Replies
    1. Why do you think so ? .Do you think minimum promoter holding is better ?

      Delete
  4. Sir what is your view upon orchid chemical at present it is your old recommendation can i buy at this cmp for one year

    ReplyDelete
    Replies
    1. Everything depends on the CDR approval in time.

      Delete
  5. Sir, What are your views on V-Mart retail?

    ReplyDelete
  6. Sir,
    Arrow coated trading almost 4 times of ur recom price..
    Should we sell partially to recover our cost and make the remaing cost free?..

    ReplyDelete
    Replies
    1. I personally prefer to HOLD it for long term.

      Delete
  7. Dear VP,
    Now even Ashish Chugh of Hidden Gems has validated the potential of Arrow Coated Products on twitter. Great research on your part and many thanks for identifying this gem very early for retail investors.
    Regards,
    Pratul

    ReplyDelete
    Replies
    1. Those having academic interest ,link on Arrow coated below :

      http://value-picks.blogspot.in/2013/08/gts-3-answer-arrow-coated-products_3.html

      Delete
    2. To the best of my knowledge Ashish Chugh is a shareholder of Arrow Coated since a long time & recommended it years ago.

      Delete
    3. Dear zeenut,

      Please check his twitter feed. He has specifically mentioned he missed buying into Arrow Coated.

      Delete
    4. For the information of all readers. Ashish Chugh is neither a shareholder nor he recommended this company anytime. On the contrary, he regrets not buying it at a lower price.

      Delete
  8. Respected Sirjee,
    What is your view on Cochin Minerals & Rutiles at CMP of Rs.93/

    ReplyDelete
    Replies
    1. Till now company could not ensure sourcing of low cost raw material due to some local issues .This is a sensitive and crucial issue .Once this issue resolved it is a good buy ,but we can't say anything about a time frame.

      Delete
  9. Carvatex Limited - Thanks for the recommendation and the necessary details/story. Please can comment on below questions:

    1. Promoters: other than on batragroup site (Link: http://www.batragroup.com/about/people/rajesh_batra), I wasn’t able to find much past track record of promoters. Sir, please can you comment/share details if any.

    2. Debt to Equity Ratio: I see the ratio is on rise for past 3 years (Link: http://www.moneycontrol.com/financials/cravatex/consolidated-ratios/C09). Mar’13 ratio stands at 1.19. Sir, please can you comment your views on this.

    3. Pledged Shares: Sir, I don’t see company has pledged any shares. I see this as a positive sign. Please can you comment if that’s correct understanding.

    ReplyDelete
    Replies
    1. Please let me know what you mean by past track record promoters .If it is connected with their attitude towards minority share holders - I believe there is nothing wrong in it.

      Recently company spend substantial amount to get the exclusive license of popular brands , it is for very long term and the benefits will accrue over a long period. Since it is one time kind expense and may not repeat in near future .So I am not expecting debt will increase further going forward as happened in the recent past.

      Delete
    2. Ok.. Appreciate your reply - thank you!

      Delete
  10. Compared to Fils, its new licence for WILSON is more promising. Its tennis oriented products are value for money. It could be a big click in india, where price of nike, reebok, adidas in tennis products is prohibitive.

    ReplyDelete
  11. Hello Sir,

    Can you give your opinion on Lovable Lingerie? Can it be included in the portfolio at current price for longer term?

    Thanks!

    ReplyDelete
  12. Schneider Electric is a buy at current levels for patient holders?

    ReplyDelete
  13. Business growth of Lovable is poor but stock price may move till there is money in the pockets of Nalanda India Equity Fund.

    ReplyDelete
  14. sir, with ref to Store one, now it is debt free & in profit-appreciate your view.
    Nikhil

    ReplyDelete
    Replies
    1. Whwther it move up or not , I am not interested to recommend any stock from India Bulls group.

      Delete
  15. Dear Sir,

    Your valuble support to small investors is highly appreciable. Could you please provide your views on MCX share, we got this in IPO at 1032/-INR , shall we make average by entering now at 502/- . Earlier i had made some buying at 420/- and my update average is 680/- which is still a loss of 26%.
    so please provide your view on MCX future prospectus.

    many thanks in advance sir,.

    ReplyDelete
  16. Dear sir, I really appreciated your recommendations. Can you please suggest any stock from A group category.

    ReplyDelete
    Replies
    1. Not tracking much stocks from A group .ABB is a good bet for long term.

      Delete
  17. Which stock would you prefer from Godrej group..awaiting reply sir

    ReplyDelete
    Replies
    1. Tracking only Godrej Consumer and Godrej Ind .Both are Hold @ CMP for me.

      Delete
  18. Dear Sir,

    Can you check BF Investments, its NAV is around 800 and it is trading at 40-45. This is thinly traded stock. It should trade around 150. What your view?

    ReplyDelete
    Replies
    1. I am not a fan of investing in holding cos unless there is any chance for take over attempt in future.Because ,99 % of such listed cos holding the stake of own group cos which never monetized or shared among its share holders

      Delete
  19. dear vp,
    you are continuously ignoring "genesys" queries. Is it because it is your multi-bagger of future?
    regards,


    ReplyDelete
    Replies
    1. I have no idea about its promoters ,hence no comments.

      Delete
  20. Dear Sir,

    Any particular reason for not tracking A group stock. Your views on SKS microfinance please.

    Regards,

    ReplyDelete
    Replies
    1. I don't think there is any scope for any extra findings .Lot of analysts and Media are always behind A group stocks and each and every happenings in such cos will be reported by them immediately and the effect of such events will be ( be it positive or negative) discounted in its stock price very quickly.More than that ,Since there is scope for short selling in stocks included in F & O segment we can't guarantee any return even if a company's working result is good.

      Though the risk of low liquidity is there ,I believe quality mid caps ( Stocks at growth stage) are best to create wealth .

      Delete
  21. Respected Sirjee,
    What is your view on REI Agro Ltd?

    ReplyDelete
    Replies
    1. Monsoon effect may impact medium term outlook of companies from this sector.

      Delete
  22. Sir,

    Panacea biotec after continuously suffering from losses, is still trading around 100. Is this because majority of shares are cornered by management+its friends+serum, leaving around 2%-3% in public. There is no one to sell. Also, do you think, Company may sell its vaccine business to Serum and Serum will get reversed merged in to this to list itself. or you think it will sell to MNC like Novartis, Glaxo.

    Thanks

    ReplyDelete
    Replies
    1. I don't think anything of the above will happen soon .But company may report better numbers going forward due to resumption of vaccine supply to WHO projects.

      Delete
  23. sir, your present view abt ,acrysil, post aquisition decision.highly thankful in advance.

    ReplyDelete

  24. sir, I have also seen the news about 'acrysil'. Kindly make us know your judgement about the new development.Regards,Hari K

    ReplyDelete
    Replies
    1. Let first they decide something meaningful .

      Delete
  25. Why now nath bio has started struggling in upward move....

    ReplyDelete
  26. it already moved from 50 to 90. what else do u expect in a month?

    ReplyDelete
  27. When i was try to buy this stock through SBI. My Order is getting rejected and got reason like below . Can you help me to under this issue. Is this stock not available for selling
    "RMS: Rule Check Circuit limits including square off order exceeds for entity account-41799071 across exchange for segment CASH across product "

    ReplyDelete
  28. What u say about rane madras and Monne is pat. Pls tel me

    ReplyDelete
  29. Sir,whats your current view on SPAN. I hold them from 29 Rs...

    ReplyDelete
  30. Dear VP sir
    Carvatex Limited - Thanks for the recommendation
    I have bought this @ 285 levels based on your recommendation and still holding. now this stock trading around 485 levels, what can I do ?

    ReplyDelete

Followers

Tweet TopOfBlogs