CRAVATEX LTD - BUY

                                 


                                                                                             

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Companies owned Indian franchise of reputed international consumer brands commanding premium valuations in Indian Stock Market .Page Industries and Jubilant Foodworks are best examples for this trend which owns the Indian rights of JOCKEY and DOMINOS PIZZA. This week let us look into another stock which can be classified in this category- Cravatex. This BSE listed micro cap owns the Indian marketing rights of more than one established International brands in India

# Company owns the long term exclusive rights to market famous Italian  sportswear brand FILA in India Sri Lanka, Nepal, Bhutan , Pakistan,Middle East and North Africa.This reputed international brand claiming 5 % market share in 2000 cr sportswear market in India which is growing 12-15 % per annum . Currently company is operating mainly through shop-in-shop formats and retail stores .Cravatex renewed exclusive license for another 30 years in 2012 for selling FILA brand in India  .After signing this long term agreement now company is planning aggressive expansion and as part of this it will add more than 60 exclusive stores in next two years to reach its number 100 .Company targeting a market share of 10 % by end of 2015 by this expansion and other marketing efforts.Company selling footwear and apparels under FILA brand in  India.

# Another international brand brought by Cravatex into India is ‘Wilson’ .Company tied up with Amer Sports (Finland) for exclusive distribution rights for the ‘Wilson’ sport  equipments which includes balls and other equipments for Tennis,Golf,Basket Ball ,Badminton,Squash..etc.

#  The most successful association ( FILA  business is  just developing) of Cravatex is with Johnson Health Tech  which is the third largest fitness company in the world.Company having exclusive license to use the brands of Johnson  Health Tech for various types of fitness equipments  like Treadmills,Cycles and various types of strength exercise equipments.There products are selling under brands like ‘Horizon’,Magnum ,Matrix,Johnson..etc. .Cavatex  is the market leader in fitness equipments through its ‘Proline’ brand fitness equipment shops with more than 50 exclusive show rooms.It is planning to add another 50 stores in next two years . Company having strong relations with well known heath club chains like Gold Gym ,Talwalkers ..etc for supplying most modern fitness equipments. Company also offering services for establishing Gyms on a turnkey basis. Company is now aggressive in tapping the vast potential of fitness equipments to be used in home.

In addition to these licensing agreement with world renowned brands ,company’s UK based  100 % subsidiary BB UK owns the rights to design ,source and supply  FILA products to Europe, United Kingdom, and Ireland.

Financials

Past five year financial performance is summarized in the below table.

Conclusion

In recent years ,company’s performance affected due to recessionary conditions  both in India and abroad.On a stand alone basis ,for the nine months of this year company reported a net profit of Rs.3 Cr and an EPS of Rs.11 .Consolidated figures will be available on completion of full year. In the past 3 years company’s stock price corrected from a level of Rs.800.Low liquidity may be a reason for this sharp fall. All these businesses having good potential and enjoys some sort of niche positioning .Considering the growth of life style diseases among Indian youth ,potential for fitness equipments business is very large especially in home segment.Company is all set to tap this vast potential and enjoying the peer company status with good sales and service network across the country.Revival in western economies and a possible peaking out of interest rate in our country are expected to change the demand scenario of company’s products.Recent renewal of licensing agreement with long tenure ( for FILA brand) will help the company to take aggressive expansion and marketing efforts. In the past two years , time was very challenging for the company due to lower disposable income of people . But from  investor's perspective ,this temporary blip is an opportunity to get into quality low liquid stocks at attractive valuation with a long term view .As I mentioned above ,low liquidity may be a reason for sharp fall in share price from higher level but the same low liquidity may push this stock to unexpected higher  levels once the situation improves.Latest December quarter result showing some early signs of improvement and ,for those having some risk appetite ,this is the right time to enter in it @ CMP of Rs 240  which is near to its three year low. ( Three year High- Low is Rs.799 - Rs.180  post bonus)

Stock listed only in BSE 

Link to Company website HERE

Link to Latest Annual Report HERE


News Related with Company Link 1 ,  Link 2 

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Since this stock is not very popular, herewith I am giving the link of one old research report on it by a broking form.( Buy recommendation initiated when its share price was  @ Rs.655) .I hope this will help you in your efforts to get a deep idea about this company .

Link HERE

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Disc: It is safe to assume that , I have vested interest in Cravatex