Re: {LONGTERMINVESTORS} Madhana Industries - Thread
Rajesh Desai
The company reported a topline of Rs 310 Cr (á36% YoY, â3% QoQ) in Q3FY13, an EBIDTA of Rs 61 Cr (á 30% YoY, 13% QoQ) and PAT of Rs 20.6 Cr. (á23% YoY, â12% QoQ); the EBITDA margins contracted by 86 bps to 19.8% on annual basis and expanded by 274 bps on sequential basis.
Valuations:
Mandhana Ind.s is niche player in Textile Ind.s with vertically integrated manufacturing facility for fabrics & garments. It has an exclusive tie-up with Salman Khan Foundation to produce and market apparel under “Being Human” brand conceptualized and popularized by Salman Khan. Production and sale of branded apparel along with accessories under “Being Human” will catapult Mandhana from being just a third party supplier to the one with establish brand. We estimate Mandhana Ind.s to post Revenues at a CAGR of 17.5% and bottom-line at 18.0% over FY12-FY14E. We retain BUY on Mandhana with price target of Rs 340.
Key Highlights
l Margin expansion on a/c of the rising share of Garments: Mandhana Ind.s has been endeavoring to enhance the share of high margin (25%) Garments in the overall revenues from current share of ~15% to 20% in near future which will help the company to increase its operating margins. The company is well diversified with about 105 clients as its clientele with none contributing more than 5% of the Garment segment revenues.
l “Being Human”brand launch: Mandhana Ind.s has launched the flagship “Being Human” store in Q3FY13, which takes the tally of EBO for “Being Human” to 5. The company is in process to raise the no. of EBOs to 8 by FY13 end. Further, the company is confident of generating sales of Rs 50 cr by year end (9M sales of Rs 22.5 cr, orders worth Rs 30 cr in hand to be executed by April 2013) from branded “Being Human” apparel. The company has achieved break even for “Being Human” brand in its first season of launch.
l Additional capacity on stream by Q4FY13: The capacity expansion for finished garments is on schedule to be commissioned by end Q4FY13. Garment capacity will double from current capacity of 3.6 mn units by end FY13. Part of the capex has already started churning trail production and FY14 will witness the effective utilization of the Greenfield production capacity thus enhancing the in-house manufacturing of the garments vis-a-vis outsourcing, thus giving a further fillip to the margins.
Warm regards,Axis Direct Research
--We initiate coverage on Mandhana Industries (MIL) with BUY rating and target price of Rs 340 (implies 11x FY14E EPS) – 25% upside potential from CMP of Rs 272.
Mandhana Industries (MIL) : Shifting Gears - Apparel to Drive Future Growth
l Mandhana Industries (MIL) - Niche player in Indian textile industry with vertically integrated manufacturing facility for Fabrics & Garments
l Diversified Client base – Marque domestic names include Allen Solly, Louis Phillipe, Van Heusen (all AB Nuvo brands), Indian Terrain, Wills, Lilliput, Shoppers Stop etc
l Consistently growing topline (@ CAGR of 25% over past 4 yrs) with stable margins (~18% EBIDTA); Capacity Utilization : 80%+ on average.
l Garments Capacity to double by Q1FY14E; Benefits to accrue in FY14E. We believe the company will replicate the past success and benefit from the operational leverage on a/c of expanding Garments capacity.
l Revenue share of high margin (~25%) Garments segment to rise to ~20% from curr. share of ~15%
l Exclusive tie-up with Salman Khan Foundation for usage of the brand “Being Human” till 2020
l Revenues are expected to grow at CAGR of 17.5% over FY12-FY14E; Adj. PAT to post growth of 18.4% over the same period
Warm regards,
ENAM Direct Research
CA. Rajesh Desai
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CA. Rajesh Desai