Porinju Veliyath’s Equity Intelligence India Private Ltd bought over 3 lakh shares in Liberty Shoes.
Equity Intelligence (PMS) bought 3.21 lakh shares at a price of Rs 235.48 on Monday.
The stock surged 15 per cent.
Footwear stocks are a good buy because of increasing demand for branded shoes, GST benefits and a fall in raw material prices.
Liberty Shoes is a good buy because it is strengthening its pan-India presence and added 10 new outlets during April-June 2016.
BOB Capital Market has recommended a buy of the stock for the target price of Rs 290.
In the quarter ended June 30, 2017, Liberty reported a net profit of Rs 1.08 crore, down 60 per cent, against Rs 2.75 crore in the corresponding quarter last year.
Bata India is trading at 45 times its FY 2018 estimated earnings.
Nirmal Bang has recommended a buy of Bata India in the expectation that the company could clock revenues, EBITDA and PAT CAGR of 11 per cent, 21 per cent and 21 per cent respectively, over FY 2017-FY19.
Centrum has recommended a buy of Mirza International with a target price of Rs 205.
Research report on Liberty Shoes by BoB Capital
Liberty Shoes Ltd. (LSL)
Gloomy quarter but light ahead; maintain BUY
Liberty Shoes had subdued performance in 1QFY17. Revenue grew by ~9%
YoY to Rs 1.1 bn vs 1.0 bn in 1QFY16. EBITDA margin contracted by 170
bps to 8.7% vs 10.4% YoY because of increased cost of raw material,
employee expenses and other expenses. Adjusted PAT decreased by ~20%
YoY to Rs. 28 mn vs Rs. 35 mn on account of lower EBITDA margin.
Revenue Increased by ~9% YoY: Liberty’s revenue grew by ~9% YoY to Rs. 1.1
bn vs 1.0 bn in 1QFY16. Out of total revenue, the domestic sales/exports rose by
9.1%/8.7% respectively on the back of volume growth driven by positive
consumer sentiments and new products range. We expect the company’s
revenue to grow at a CAGR of ~13% over FY16p-18e on account of increasing
demand for branded & quality products, fashion consciousness and govt.
initiatives like implantation of 7th pay commission and implementation of GST.
EBIDTA margin contracted by 170 bps YoY: The company’s EBITDA stood at
Rs.105 mn vs Rs.115 mn a YoY/QoQ de-growth of ~9% respectively. EBITDA
margin contracted by 170 bps to 8.7% vs 10.4% YoY due to increased cost of
raw material led by increased crude oil prices and rubber prices. (Raw material
cost was 46% vs 45% of total sales YoY), employee cost and other expenses
was 44% vs 42% YoY (LSL has plants in Haryana and recently Haryana Govt.
increased minimum wage rate for the workers). This led contraction of overall
EBITDA margins for the company. We have already factored in the impact of
wage rise in EBITDA margin. Even though, we expect, the company’s EBITDA to
grow at a CAGR of ~15% over FY16p-18e with a marginal expansion of 40bps in
EBITDA margin to 9.8% over FY16p-18e led by improving product mix with the
better affordability at consumer’s end, new launches and operational efficiency.
Strengthening store network: The company is aggressively strengthening its
pan India presence and added 10 new outlets of franchisees and Company
Owned & Company Operated (COCO) in Q1FY17. The company continues to
find and explore untapped market and revamping e-commerce platform to
enhance its presence.
Valuation: We expect, the company’s revenue/earnings to grow at a CAGR of
~13%/~48% over FY16p-18e respectively led by increasing demand for
branded footwear, diversified product portfolio and reduction in raw material
prices. At CMP of Rs.176, the stock is trading at a PE of 15x/12x of FY17e/18e.
We maintain our BUY rating on the stock with the target price of Rs.290 (at a
one year Avg. forward P/E of 17x of FY18e EPS)
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