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Wednesday, February 2, 2011

Cantabil Retail India Ltd:-Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

Scripscan:Cantabil Retail India Ltd
Traded in:Nse-bse

Story:Five points to qualify Cantabil Retail India Ltd as a good medium term buy.

1)Cantabil Retail is in the business of designing, manufacturing, branding and retailing of apparel under the brand names 'Cantabil' and 'La Fanso'. It offers party wear, formal wear and casuals for men, women and kids in the middle-tohigh income group. It operates outlets under two models — either company owned and franchisee managed or franchisee owned and operated. Cantabil has three inhouse manufacturing units and four warehouses in New Delhi.

2)The company has an established discount brand in the domestic apparel market with a diversified product portfolio for men, women and children. It has a wide network of exclusive retail outlets across metros, Tier-I and Tier-II cities in India. The proposed manufacturing facility will reduce dependence on third-party manufacturers and improve profitability. CRIL has a healthy financial profile with steady growth and improvement in operating profitability in the past. It has experienced promoters with around two decades of experience in the garment industry. There is also favourable demand outlook for organised retailing in the country.

3)The company is an integrated apparel manufacturing and retail company with in-house capabilities for designing, sourcing of fabric and garment accessories,manufacturing and retailing of apparels. The company’s core competency lies in its designing and stringent quality control. The company has a centralized purchasing system for sourcing of fabric directly from mills or from supplierswhich helps them to reduce cost of inputs and maintain quality of fabrics.Currently, the company has 381 outlets across India which are either owned bythe company or managed by franchisees. To promote its brands further and tofurther growth, the company has plans in place to open 180 exclusive brandoutlets by March 2011.

4)Major strength:Integrated manufacturing and retail business with in-house capabilities of designing will help to maintain the quality of the fabrics and change designs accordingly. It will also aid improvement in operating profit margin (OPM of CRIL improved from 9.6% in FY 2008 to 14.3% in FY 2010). The company plans to have at least 20% of the upcoming outlets in Tier II cities and towns. Enhancing its presence in Tier II cities will improve its brand presence.Major proportion (87%) of the apparels sold by the company is in the men’s wear segment, which is most developed and organized compared to other categories in the domestic apparel market.

5)CRIL’s diversified product basket in the discount apparel segment, coupled with wide retail network, provides strong edge in the highly fragmented and competitive marketplace. Not only has Cantabil scaled up its business (Turnover up 9x and profits 12.5x in 4 years), it has also improved its operating margin by nearly 620bps in last four years and with the commencement of proposed facility at Bahadurgarh, it will provide further impetus to its margin profile. Given the proposed store expansion plans, I expect CRIL to witness strong growth in the medium term. At the cmp of 47rs its quoting at less than 4 times its fy11 earnings which is unheard off in the retail sector.Cantabil definetly deserves a higher price and thus.

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