Monday, September 19, 2011

Cravatex Ltd.

Cravatex is basically a trading company currently trading at 450 with market cap of 125 crs.. It trades in two segments Sports and Fitness.

In fitness equipments it has rights to sell products of Johnson ( no.4 brand in world) , Horizon , BodySolid , Magnum under the brand name of Proline Fitness.

In sports segment it has rights to sell product of brand called FILA. Fila is a 100 yr old Italian brand which ranks 5th in world after Nike , Adidas , Reebok and Puma. Fila worldwide sells 15000cr. of merchandice yearly worldwide. In 2008 Batra brothers got right to sell FILA in India along with North Africa , Bangladesh , Srilanka.

In June 2011 results cravatex turnover was 42 cr (26cr domestic , 13 cr international) with Net Profit of 2.8. Since FILA brand has priced lower than top 4 brands, middle class people will get attracted to FILA. Assuming in next 5 years they manage to clock 500cr. of sales with Net Profit of 50 crs. we get an EPS of 385 ( 50/0.13 ) . Since its a pure consumption story market gives high PE to this sector . Assuming worst case PE of 10 while best case of 35 we can see this stock in range of 3850 - 13475.

Calculations are based on BOTE and has few risks attached to it. Do your own Diligence before buying.

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