Sunday, August 8, 2010

Stock Idea: Crew BOS Products

Crew B.O.S Products (Rs 93)
(BSE Code- 532542 NSE Code- CREWBOS)
(P/E- 7.6, Market Cap- Rs119 cr, FY10 Sales- Rs465 cr)

Crew B. O. S. Products Limited (CBP) is into the manufacturing and exporting of fashion accessories & home decoration products made from fabrics, leather, metal, wood etc. The Company’s business model is based on manufacture and export of fashion accessories & home decoration products made from fabrics, leather, metal, wood etc. The company is involved in selling fashion accessories products innovated through unique ideas. The company’s product profile ranges from belts, bags, portfolios, business cases, footwear, wallets, boxes, furniture to home furnishings. Crew B. O. S. is constantly engaged in broad basing its product portfolio in order to keep itself abreast with the latest changes in fashion trends around the world. Crew BOS' niche product lines can be divided into four divisions: fashion bags and wallets division, belts and footwear division, home goods division and watch strap division.
India is still a virgin market in terms of branded fashion accessories with designer wear accounting for less than one per cent of the apparel market ( global level stands at 5 per cent of the apparel market). The designer wear industry is expected to grow to Rs 1000 cr. by 2015: four times the current industry size. To encash this huge opportunity, the company is looking at penetrating the domestic market under it's own brand name. CBP also intends to initiate a multi brand concept (different brands for youth, executives, women, etc.). CBP operates from its seven facilities in Gurgaon and Manesar for manufacturing various fashion products. The company’s revenue model is based on catering to the outsourcing requirements of the leading international brands in U.S. and Europe. The company’s customer profile comprises reputed international retail brands like NEXT PLC, ESPIRIT, ZARA,, MASSIMODUTTI, ARMANI EXCHANGE, TESCO, H& M in Europe. The customers in USA include GAP, BANANA REPUBLIC, OLD NAVY, CHICO’s, FOSSIL. The company has a highly scalable business model and there is tremendous scope for ramping up every individual client account. Over the years, Crew B.O.S has fully transformed itself from being just a bags and belt manufacturer to a multi-product company catering to a complete range of fashion accessories and home decoration products.
Net profit of CBP rose 106.06% to Rs5.44 cr. in the Q1 ended June 2010. Sales rose 77.53% to Rs 151.52 cr. CBP had posted good numbers for the year ended March 2010. Top line grew by 35% to Rs465.32 cr. whereas PAT grew 106% to Rs. 15.45 cr. for the year on consolidated basis. The FY10 EPS on a equity of 12.8 cr (Promoter’s stake- 54.13%) stood at Rs 12.1. On standalone basis, the company posted net profit of Rs18.56 cr. on net sales of Rs 444.31 cr. for FY10. The company mainly exports products to US and Europe. US accounts for 53% while Europe accounts for 43% of its exports. Outsourcing holds tremendous potential for Crew B.O.S and imparts scalability to its business model. Skilled labor force, modern machinery and quick adaptability to changing trends in fashion industry have enabled Crew B.O.S to establish its foothold in outsourcing market. Over a period of next 5-10 years, the entire fashion accessory industry is expected to be dominated by countries endowed with cheap labor. The other distinct advantage, which the Company has, is the presence of strong tie-ups with the suppliers and vendors for supply of raw materials and consumables both locally and abroad
At the current market price of Rs93 the CBP stock trades at 7.7 times its FY2010 earnings at 6 times its FY11E earnings (Rs 15- Rs 16) and has market cap of 119 cr. against net sales of Rs 465 cr for FY10. Valuations certainly seem to be attractive. Higher demand for fashionable and trendy products by the youth is what provides the high opportunity. CBP has gained reputation and established itself globally as supplier of quality Fashion Accessory Products. CBP offers a one-stop shop for fashion accessories and home decoration products. To add to that the lower labour cost makes India attractive and with more orders, the company would get benefits of economies of scale. In view of the improved results and good medium term prospects, Investors can start accumulating the stock at current levels and add more on declines for decent returns of 50%-60% over the next 8-12 months. Accumulate
Source: Internet (Valuenotes by Sanjay Chhabria)

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