Buy Liberty Shoes; target of Rs 195: Angel Broking

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Buy Liberty Shoes; target of Rs 195: Angel Broking

Broking house, Angel Broking is bullish on Liberty Shoes and has recommended buy rating on the stock with a target of Rs 195.

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Broking house, Angel Broking is bullish on Liberty Shoes and has recommended buy rating on the stock with a target of Rs 195.

Angel Broking report on Liberty Shoes:

Investment Argument

Tapping the retail boom, the shoe must go on:

"Liberty Shoes, along with its 100% subsidiary Liberty Retail Revolutions, is   aggressively spreading its retail presence by tapping leading malls and   chain stores across the country. The company is targeting 25 Revolution   stores and 25 shop-in-shop showrooms with Central, Westside and   Piramyd. Thus, its total retail presence will increase to 55,000 sq.ft. in FY2007 - a substantial jump from the 30,000sq.ft. in FY2006. Liberty has also partnered with Pantaloon to set up a JV company for the retailing of footwear and other accessories. The JV will function   under two formats - value and lifestyle. The number of operational stores will be 10 in FY2007, and will be further increased to 25 in FY2008." 

Ramp-up in capacity:

"Liberty has setup a new plant in the tax-incentive area of Himachal Pradesh, at an investment of Rs.17.5cr and a capacity of 2.5 million pairs per annum. The company has also setup another plant in Uttaranchal, with an investment of Rs.22.5cr and a capacity of 1.5 million pairs per annum. Both these plants have commenced their trial operations in Dec 2006. We expect a substantial jump in Liberty's turnover and profits from FY2008, due to these expansion initiatives."

Rising exports:

"Liberty Shoes has recently bagged an export order  worth Rs.100cr from Van Elten, Germany, which will be executed over a  period of 3 years (starting from April 2007). This is part of the multipronged  strategy being pursued by Liberty to consolidate its presence  in the global market. In addition to making footwear for Nike and Reebok, Liberty has also executed its first order from Wal-Mart."  

Valuation

"Liberty's management has shown ample initiative in taking advantage of India's   retail story and expanding accordingly. With its focus on branded retail and   with its labour issue sorted out, LSL is set to be re-rated on the bourses. At the CMP, the stock trades at 8.5x FY2008E and 6.8x FY2009E earnings of Rs 16.5 and Rs 20.5, respectively. We initiate coverage on the stock  with a Buy recommendation and a 12-month Target Price of Rs 195, giving it a 39% upside from the current level."