Sunday, October 3, 2010

Stock Idea: Repro India

Repro India (Rs 135)
(BSE Code- 532687, NSE Code- REPRO)
(P/E- 7, Equity- Rs10.5 cr, FY10 Sales- Rs201 cr, Market Cap- Rs141 cr)
Repro India Limited is one of the few integrated print solution provider and a manufacturer and exporter of books in the highly fragmented printing industry. Its solutions include content management, configuration to content delivery and the entire supply chain for publishers. The Indian Printing industry has managed to grow at a CAGR of 14% over the last 25 years. to touch Rs 1100 cr.. That is almost twice the GDP growth rate. Repro has successfully evolved from a printing press to an end-to-end print solutions provider. The company provides value-added printing and prints related solutions to major publishing houses, corporates and software companies. The clients of the company include publishing houses such as Alligator Books, Macmillan, Orient Longman, Oxford University Press; software companies Microsoft, Oracle, IBM; and Indian corporates including Tata Steel, Infosys, Wipro etc. Repro had come with an IPO in November 2005 at Rs 165 per share and raised Rs 43.2 cr.. RIL’s equity stands at 10.51 cr. out of which promoters hold 68.53% while the public holding is 25.35%.
Through content process outsourcing, Repro offers content, creativity and designing. It provides desktop publishing, ideation, content creation, designing, illustration and copywriting. Content Process outsourcing is another large opportunity for India and holds great potential as we have a low cost talent pool, design and creative capabilities and knowledge of English language. Countries like USA and the UK, which are considered among the largest markets for printing industry, are increasingly looking at outsourcing to low cost countries such as India. Repro offers print solutions for educational and children’s books for the publishing industry and annual reports and other corporate print solutions for corporates. Digital printing is utilized for IT industry and print on demand (POD). It also services the insurance industry through POD. Repro is also into contractual publishing—magazine printing and others like replication of CDs and stock management activities
Net profit of Repro India rose 12.69% to Rs 2.93 cr. in the Q1 ended June 2010. Sales rose 25.95% to Rs 59.5 cr. in the quarter. Repro had posted a 16.5% decline in topline to Rs. 201 cr. for FY10 while net profit grew just 6% at Rs 17.55 cr.. On a equity of 10.51 cr., the EPS stood at Rs 16.7 and the dividend declared was 30%. Almost 35% of the company’s turnover comes from exports. Its exports business holds significant revenue upsides as it shifts focus from straight printing to content process outsourcing (CPO). As the company would be focusing on CPO for its foreign clients it expects margins to grow in future. The expansion at Surat SEZ and Vashi units will also bring benefits this year. As the company scales up its business and sets up infrastructure to support its expansion in the exports market, it expects higher realizations in the years to come. The Repro stock appears attractive as it is valued at about 8 times FY10 earnings (Rs 16.7) and at 6.9 times FY11E earnings (Rs 19- Rs 20). On account of increasing contribution from higher margin businesses and attractive valuations, the stock holds good potential for appreciation in the medium-long term.
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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