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IPO REPORT
Monte Carlo Fashions Ltd.
Dresses up for Hot Markets
2
Issue Details
Shareholding Pattern
Share reservation (%)
About the company “Monte Carlo Fashions Ltd”
One of India’s leading woolen apparel brand, Monte Carlo Fashions Ltd (MCFL) was
launched in 1984, as an exclusive woolen brand by parent company “Oswal Woolen Mills
limited (OWML)”. Company was engaged in spinning of woolen, cotton and other
blended yarns and is now recognized as a ‘Superbrand’ for woolen knitted apparel in each
edition of consumer super-brands India. Mauritius based private equity firm acquired a
stake in Monte Carlo in June 2012. Samara Capital currently holds 18.51 % of the pre-offer
capital of the company. MCFL distributes its products through ’Monte Carlo Exclusive
Brand Outlets’ in various parts of country (196 as on June 14’) and caters in premium and
mid-premium branded apparel segment for men, women and kids. Launching of IPO in
the winter season will help company take advantage of the seasonal effect along with
stock markets on a roll.
Issue Objective
To achieve the benefits of listing the Equity Shares on Stock Exchange and for the sale
of 5,433,016 equity shares by the selling shareholders
Listing the shares on exchange will increase the brand image and transparency to the
precious customers along with providing liquidity to the subscribing shareholders
Being an ‘offer for sale’ the company will not receive any funds raised by IPO and all
proceeds will to in the hands of shareholders. Company being a cyclical one, the sales is
bound to vary with the market scenario.
Our Recommendation: “SUBSCRIBE for listing gains”
For the above lower and upper price band of Rs 630-645, the P/E stands at 24.73x and
25.31x which is less as per industry standard (average P/E 28x), hence we believe that the
company’s IPO listing would be a success and investors would benefit from healthy listing
gains. High Debt/Equity ratio of 0.24 is a concern, followed by decrease in Cash in hand
worries a bit, we believe the company’s precious brand value and venture in new seg-
ments, along with strong fundamentals will prove to outperform peers and make a grand
entry in the already heated up Stock Market. We recommend to SUBSCRIBE.
Stock Recommendation
Rating Subscribe
Issue opens 3-Dec-14
Issue Closes 5-Dec-14
Price band (Rs) 630-645
Potential Upside 25-30%
Fundamental Report By Epic Research
Monte Carlo Fashions Ltd
1-Dec-14
Please refer to disclosures at the end of this report www.epicresearch.co
Face Value (Rs) 10
Issue Size (Rs Cr) 350
Industry Clothing
Lot Size 23 shares
QIB 50
Non institutional 15
Retail 35
Issue Manager
BRLM SBI Capital Market,
Axis Capital,
Edelweiss, Religare
Registrar Link Intime India
Listing BSE, NSE
Pre IPO %
Promoter 81.06
Samara Cap 18.51
Others/ Public 0.43
Post IPO %
63.63
10.94
Romil Jain
Jayesh Tare
Source: Company RHP, Epic research
Financial Performance
Y/E March (Rs Cr) FY12 FY13 FY14 Q1FY15
Revenue 375.4 416.5 518.9 74.8
YoY % NM 10.9% 24.6% -
EBITDA 85.1 83.0 109.4 18.0
Margin % 22.7% 19.9% 21.1% 24.1%
PAT 48.9 49.5 55.4 8.5
Margin % 13.0% 11.9% 10.7% 11.4%
EPS (Rs) 26.92 23.33 25.48 3.92
ROE % 32.5% 15.2% 14.6% 2.4%
ROCE % 39.5% 19.7% 20.3% 11.3%
BVPS 69 149 175 179
Analyst’s
25.43
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Why Should you SUBSCRIBE to this IPO?
Monte Carlo brand is famous for its comfort fabric and designs
As per Technopak Report, 2014, MCFL is the leading woolen knitted apparel brand in India in the
premium and mid-premium segment. Monte Carlo being the flagship brand of the company, has
helped place company as one of the top retailers of branded apparel in India. Company successfully
launched many segments under Monte Carlo to cater needs of every age groups. For eg ‘Platine’ is
premium range for men, ‘Denim’ is exclusively for denim apparels, ‘Alpha’ exclusively for women
and ‘Tweens’ for kids. Integrated marketing and customer relation and merchandising strategy
helped to intervene new areas.
Vast geographical distribution and marketing keeps company in good position Distribution done mainly through MBO and Exclusive Outlets helps company maintain its high status.
Fashion stores are present in various parts of country totals 1300 outlets on pan India basis.
Company has 77 brand outlets in Northern region; 42 in Eastern regions; 57 in Central region; 11
in Western region and 4 in Southern region. Company also entered into distribution agreements
with some of India’s leading digital commerce for sale of their products and easy availability of
clothes. The company also plans to increase the no of MBO and exclusive Outlets to 250 in coming
years. With little market capture in Southern region where company hopes to launch many other
stores. Demand in south had been low owing to warm climatic conditions. However, with the new
cotton garments facility, company is sure to capture more of southern market with exclusive designs
and quality material.
In-House designs and manufacturing makes it self-sufficient
Company enjoys a competitive advantage being self-sufficient in in-house and design team, dedicat-
ed manufacturing facilities for woolen and cotton apparel along with long term relationship with
third party manufacturers. Dedicated design team ensures that fresh and trendy designs suitable to
the minds of people are in market along with a close eye on the emerging trends. With continuous
market surveys through dealers, retailers and dedication, people’s mind is captured on clothes and
presented in handy. Almost all manufacturing is done in the facilities owned by the company while
for other products, they follow asset light model by outsourcing the production to a network of jobs.
Diversified product range for warmth and make a fashion statement to all sections of society
Company provides a vast portfolio of product offerings in the woolen, cotton and cotton-blended
apparel. With this portfolio the company manages to penetrate even the niche areas apart from
metros and Tier I and II cities in India. Products are priced such that they are accessible to the every
economical class while still maintaining profit margins (10-15%). Their winter collection includes
sweaters, cardigans, jackets, blazers, suits, shawls and stoles whereas, non-winter collection includes
shirts, trousers, t-shirts, cargos, linen apparel and denims. MCFL also launched a home furnishing
range which includes mink blankets, bed sheets and quilts. Additionally, they sell thermal wear and
other winter accessories including scarves, mufflers and woolen caps in ‘Monte Carlo Exclusive Brand
Outlets. With the GDP growth back on track, consumer spending is sure to increase along with win-
ter season on the verge.
Age old name and firm roots in
the history of Woolen
apparels, provides a rational
for investment
IPO report
Fundamental Report By Epic Research www.epicresearch.co
Vast distribution and access
to every house hold makes
it hot favorite
Provide variety of apparels for
every occasion
Exhaustive market surveys
helps to bring latest fashion
and trends in apparels
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INDUSTRY OVERVIEW
Textile and apparel industry has been a major contributor of India’s GDP along with employing more
than 35 million people. The industry is crucial in terms of industrial production and foreign
exchange. Easy availability of raw materials as cotton, wool, silk and jute along with skilled work-
force makes our country eye-widening for many. As of 2013, India’s textile market reached US$ 59
billion while the total export market was at US$ 36 billion. India’s Textile industry has been growing
with a CAGS of 9% and is expected to grow rate of 11% at the same rate with total market.
Geographical Distribution decides the nature of growth for the sector
Change in seasonality affects the apparel industry. Winter season leads to more sales of apparel.
While the winters are strong in northern part of the country, they are scanty in south and western
region. Metro cities top the list with majority of them going for branded wear, with fine quality and
style, other Tier I and II cities are economical and are basically need based than style based. The
need of clothing vary from economies of scale for people in metros where style if their status quo.
The rural and rest urban sector is much deprived of brands and is mainly unorganized by khaadi and
other low quality material.
India’s Woolen Apparel Industry fragmented to branded and unbranded Players
India’s textile industry has been divided into branded and unbranded players which pose problem to
players especially in winters. The ratio is 70:30 with 70% players from unbranded sector. Common
people are still far from reach of branded because winters are for 3-4 months only. However, with
new designs and new pricing being brought up by the branded players, the companies are luring the
customers to try new apparels keeping fashion in mind. Online shopping provides easy access to
new brands as well high street showrooms will attract the crowd.
Industry demands for a more
organized way to channel
investments
IPO report
Fundamental Report By Epic Research www.epicresearch.co
Scope for multi billion industry
with a CAGR of over 11% in
next 10 years
Geographical Distribution of Woolen Industry in India Region wise Distribution of Apparel Industry
Source: Technopak Report, Epic Research Source: Technopak Report, Epic Research
Economies of scale forms
single major factor to churn
portfolio
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Company Profile
Monte Carlo Fashions Ltd (MCFL) was incorporated on July 1, 2008 in Ludhiana, Punjab under the Indian Companies Act, 1956 as a subsidiary of OWML. MCFL is India’s leading woolen apparel man-ufacturer and has been recognized as “Superbrand” for woolen knitted apparel in each section. MCFL caters to need of consumers for premium and mid-premium winter wears in northern and eastern regions. Company has under its kitty two manufacturing units located in Ludhiana, one for woolen and other
for cotton apparels. Manufacturing Facilities include facilities for product development, design stu-
dio and sampling infrastructure. All woolen and cotton knitted apparels are manufactured in-house
with newly started in-house especially for t-shirts and thermal wear in April, 2014. Company follows
an asset-light model by outsourcing the production to a network of third party manufacturers.
MCFL distributes its wide range of collection through ‘Monte Carlo Exclusive Brand Outlets’ and
Monte Carlo Brand Outlets (MBO), that provides customers a vivid and enriched experience with a
class apart. On a broader view, company holds 196 MBO( June 14’), out of which 18 are owned by
company and rest by franchisees. Company also opened two Exclusive outlets in Dubai and one in
Kathmandu. MBO are located at high street locations and malls, catering to needs of every segment
and class of society.
Management : Brief Profile Mr. Jawahar Lal Oswal, aged 70 years, is the Chairman and Managing Director and has been
involved with the Company since incorporation. He holds a bachelor’s degree in commerce from the
Commercial University Limited, New Delhi. He has more than 50 years of experience in the textile
and woolen industry. At the time of joining the Company in 2008, he was the chairman and
managing director on the board of directors of OWML. He presently continues to hold such position
at OWML and is also the chairman on the board of directors of NSML, NIEL, NPFL and NCFSL. He has
been awarded the ‘Punjab Ratan’ at the Punjab State Intellectual’s Conference in 2003 by the All
India Conference of Intellectuals, the ‘Udyog Ratna Award’ by the PHD Chamber of Commerce and
Industry in 2005, the ‘LMA-Sat Paul Mittal Life Time Achievement Award’ by the Ludhiana
Management Association in 2012 and the ‘Achievers of the North’ by the Economic Times in 2013.
He was appointed as Chairman on our Board on July 7, 2008 and as Managing Director with effect
from August 10, 2011.
Its the way you make me
feel..........Monte Carlo !
giving comfort to India since
inception
IPO report
Fundamental Report By Epic Research www.epicresearch.co
Classification of Apparels
Source: Company RHP, Epic Research
Extensive clothing portfolio for
with immense variety and
designs, blended with comfort
and style
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FINANCIAL PERFORMANCE
Poised for higher growth; Revenues growth favorable
MCFL posted a robust set of figures for the FY14 with revenue up by 24.6% to Rs 519 Cr (v/s Rs 417
in FY13). The increase in sales was augmented by increase in demand of kids apparel by 8%, with
stipulations of GDP growth followed by increasing overseas market. EBITDA margins showed 31.9%
increase to Rs 109 Cr (v/s Rs 83 Cr in FY13) factored by decrease in prices of raw material and high
revenue which offset the increased expense cost. Operating margins showed an improvement of
120bps to 21.1% in FY14. Operating margins are amongst the best in apparel industry( average 20%).
Owing to marginal increase in depreciation and interest charges owing to expansion plans in setting
outlets (50%) put pressure on the PAT which was up by 11.9% YoY to Rs 55.4 Cr.
Revenue increased by 24.6%
supported by overseas market
and 8% growth in sale of kids
apparel
IPO report
Fundamental Report By Epic Research www.epicresearch.co
Source: Company, Epic Research Source: Company, Epic Research
Revenue-EBITDA Graph EBIT-PAT Graph
Flat ratios provide hope for revival and good revenue to repay debt
Returns have subsided owing to the slowdown in economy which lead to a decrease growth in the company. ROE and ROCE were
14.6% and 20.3% respectively which showed the slight improvement in the current scenario. While the company stand on a debt of
Rs 89 Cr in FY14, debt-ratio remained sub 0.3 levels which shows good cash flow. We hope reversal of fortunes of company with
Govt intervention to pull up the apparel industry.
ROE and ROCE Compared Debt-Equity
Source: Company, Epic Research Source: Company, Epic Research
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IPO report
Fundamental Report By Epic Research www.epicresearch.co
Y/E March (Rs Cr) FY12 FY13 FY14
Revenue 375 416 519
Growth (%) NM 10.9% 24.6%
Cost of goods sold 183 207 261
Gross Profit 192 209 258
Total SG&A 107 126 149
EBITDA 85 83 109
margin (%) 22.7% 19.9% 21.1%
Depreciation 6 7 16
EBIT 79 76 93
Interest 7 4 9
PBT 73 72 84
Tax 24 23 28
PAT 49 49 55
margin (%) 13.0% 11.9% 10.7%
Consolidated Balance Sheet
Consolidated Income Statement
Y/E March (Rs Cr) FY12 FY13 FY14
Share capital 19 22 22
Reserves and surplus 131 303 358
Total Equity 150 325 380
Debt 62 67 89
Deferred tax liabilities (Net) 1 1 4
Provisions 2 4 2
Other current liabilities 23 49 70
Trade Payables 37 41 84
Total liabilities and Equity 276 487 630
Fixed assets 68 128 188
Investments 0 40 95
Loans and advances 23 27 34
Inventories 110 109 140
Trade receivables 72 74 89
Cash and bank balances 1 107 82
Other assets 0 1 3
Total Assets 276 487 630
Source: Company, Epic Research
Source: Company, Epic Research
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IPO report
Fundamental Report By Epic Research www.epicresearch.co
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