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Market outlook and stock tip:-Cravatex ltd
Saturday, August 27, 2011
Story:I was fortunate to pick the counter at 45 bucks couple of years back(price adjusted bonus)(http://www.arunthestocksguru.com/2011/06/cravatex-ltd-buysellgrowth-prospects.html)but then management was too lethargic and were sleeping then.Having started business as a chain of dyers and dry cleaners, Cravatex gradually diversified into textile processing and printing and later on into manufacture of sports and casual wear and distribution of fitness equipment for home and institutional use. It sells brands like Fila, Slazenger and Nassau; its own brand is Proline, a popular name in casual attire and sportswear. It also distributes “advanced international beauty therapies”, to spas across the country.Cravatex has over 51 retail stores across India, retailing fitness equipment for home use.Its institutional clients include various hotels, health clubs and gymnasiums, corporates and housing societies.It also exports readymade garments but this is a small business so far.Higher disposable income and rising health consciousness is creating a boom in fitness equipment and this should help Cravatex bigtime.
The main reason why I feel cravatex would be a multibagger is its recent agreement with FILA.Google up "Fila signs agreement" and you would come across,"Fila has announced it has entered into a long-term licensing agreement with India's Cravatex for the Middle East, North Africa and India".Fila is one of the world's largest sportswear manufacturing companies having revenues of over 6500crs(usd 1.5bn).The market for premium sports apparel and footwear in India has gone through a period of quick expansion and is predicted to continue growing at a CAGR of around 15% during 2011-14 and is currently worth Rs. 2500 crores. The mounting popularity of sports, increase in the personal disposable income and change in the lifestyle are the major catalyst for the growth.Cravatex is Fila India which means whatever revenues fila would do would be under the accounts of cravatex.Fila India has shown great promise in it’s debut year of operations. The footwear driven approach to the market has led the brand to be present in over 1135 doors for footwear, 105 doors for apparel and a presence in over 200 shop in shops in large format stores. Fila has also opened its first 4 retail stores this year and plans a more retail led approach to the market in the coming years.Fila India targets a revenue of 150crs-200crs in the next 3-4 years which should massively rerate the counter of cravatex.As the statement says the agreement is for India,middle east and north africa.I have excluded all those areas and countries.So even if any other region clicks cravatex would move to a different levels of its own.Its proline fitness brand should do well too.
Many of you are in facebook so why dont you folks give a vigil to the "FILA INDIA page".Look how the brand is spreading like fire.Cravatex is in a hiring spree with employee cost finding a 60% hike in fy10-11 vs fy09-10.Fila"s stuffs are better in quality and comes cheaper to rivals like Puma,Nike,Adidas.Cravatex is worth 96crs(marketcap) which is incredibly cheap when we consider similar businesses like "Page industries(2100crs) and Lovable lingerie(700crs)"Valuation wise too cravatex should do 50rs EPS conservatively for the present fiscal.Lovable and Page both trades at over 25 times expected earnings.Even if we give 20 PE we get a target of 1000rs.My assigned target is based on the most conservative estimate meant for medium term investors.Have a pie of cravatex and help yourself to get richer in the coming years.
Todays update:The company just hit 700rs which was the target, up 90% from the suggested price within the penned duration period and looks good for even more.
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