Buy Celebrity Fash; target of Rs 190: IL&FS Investsmart

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Buy Celebrity Fash; target of Rs 190: IL&FS Investsmart

Broking house, IL&FS Investsmart is bullish on Celebrity Fashions and has maintained buy rating on the stock with a price target of Rs 190.

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Celebrity Fash BSE | NSE 01/06/12 Are Mutual Funds betting on Celebrity Fash?

Broking house, IL&FS Investsmart is bullish on Celebrity Fashions and has maintained buy rating on the stock with a price target of Rs 190.

The IL&FS Investsmart report on Celebrity Fashions:

Acquisition faces hitches, outlook remains positive

"Celebrity Fashions reported lower than expected results for Q1FY07. The company's revenues were affected due to some hitches faced in the acquired trouser unit and the delayed construction of the new shirts unit. Some of the clients of the trouser unit delayed their orders due to a fresh qualification procedure followed by them on change of the manufacturing unit's management. The substitution of these orders with low-margin orders pressurized the company's margins. This situation was compounded by the additional loss of some shirt orders, as monsoons slowed down the construction of the shirts unit at Apparel Park. Higher working capital debt and term loans undertaken to fund the acquisition-increased interests cost during the quarter. Consequently, net profits fell 24%."

"We expect the regular order flow to pick up from Q3FY07 since the new shirt plant is undergoing trial production; in addition, as part of the qualification process, test orders have been received for the trouser plant.  This, along with combined productivity improvements in the existing units, will improve profit growth during the next two years. Around 11 new exclusive stores for the 'Indian Terrain' brand are also likely to be fully operational by the second half of the current financial year, adding to the topline growth. In this manner, during the second half of the year, Celebrity Fashions is likely to make up for most of the lost orders during Q1FY07."

"We have revised our EPS estimates downwards to Rs 8 and Rs13.8 for FY07E and FY08E respectively. However, the stock price has corrected sharply since our earlier estimates and currently trades at 8.7x our FY08E EPS. We maintain a 'BUY' on the stock with a price target of Rs 190."