Buy Repro India; target of Rs 175: Sunidhi Securities

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Buy Repro India; target of Rs 175: Sunidhi Securities

Sunidhi Securities is bullish on Repro India and has recommended buy rating on the stock with a target of Rs 175 in its October 3, 2011 research report.

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Sunidhi Securities is bullish on Repro India and has recommended buy rating on the stock with a target of Rs 175 in its October 3, 2011 research report.

"Repro India (RIL) is an integrated player, providing end-to-end solutions right from managing and re-purposing content, to printing (in different formats, sizes, volumes) & binding to delivery anywhere across the globe. This gives the company a competitive advantage over its organized & unorganized peers. Its 80% revenue comes from the education sector. Exports constitute 55% of sales.  We met the management of Repro India at its SEZ plant in Surat. Followings are the key takeaways from discussions with Dr. Pramod Khera, Executive Director."

"Acquisition of Chennai printing unit of MPIL for Rs 4.25 crore is likely to benefit RIL in the long run. With this acquisition, RIL would strengthen its foothold into the south Indian market. The acquisition would also throw-up opportunities for RIL to partner with Macmillan globally. Further, under the acquisition arrangement, RIL has also won a seven-year Rs 300 crore outsourcing contract from MPIL, which is likely to boost RIL's turnover & profits going forward. Macmillan had a printing unit which had a limited capacity. They used to print in advance and stock the books so that when the season came, they would be able to deliver the books. Or they used to outsource to meet the demands of the season. Now with Repro, it will have not only its facility but also Repro's facilities at its disposal. They need not print books and stock in advance and as a result a lot of its working capital that is locked in inventory gets released. With Repro it now need not worry about the quality as RIL has the expertise and the latest machines for printing as well as post-press processes. That's the essence of this relationship. RIL has taken over MPIL's printing unit and intends to use it to service Macmillan's requirement. But there is no constraint. RIL can use the facility to serve other clients as well. RIL intends to gradually start servicing its South India clients from that facility. This will bring additional benefits to RIL's clients based in south and secondly, it will be fulfilling Macmillan's requirements from Chennai, Surat or from Mumbai unit."

"Repro's core activities are supported by a state of the art infrastructure which includes the most contemporary Information Technology and two modern plants on India's west coast. RIL has strategic partnerships with global logistics providers. The export constitutes 55% of sales of the company. RIL has relationship based businesses with large publishers in UK, USA and Africa. The Marquee clients include publishing houses such as Alligator Books, Heinneman Educational Books (Nigeria) Plc, Modern Publishing Inc, Orient Longman, Oxford University Press and Penguin and Software companies like Microsoft Inc, Lenovo India, and Indian Corporate include Tata Steel, Nokia India, NIIT, Wipro and Satyam Computer Services. The 80% of Repro's customers give repeat business and engage with Repro in long-term contracts ranging from two to ten years.  RIL's initiatives like offering digital workflow and comparable technology, adding new clients in India and abroad, increasing the geographical spread, enhancing products and services vertically to existing clients and/or offering value added services, providing content services globally coupled with the global focus on education, the sustained growth in consumption of printing products, strong outsourcing trend and the advantages of global sourcing etc. coupled with ensuing expansion give strong visibility to revenue & profitability in the coming years."

"In view of the better than expected Q1FY12 results, ensuing expansion and bright future prospects highlighted post the management/plant visit, we are upgrading our EPS projection to Rs 27.8 and sales to Rs 335 crore.  At CMP of Rs 134, the share is trading at a P/E of 4.9x on FY12E. We recommend BUY on the stock with a revised price target of Rs 175 in the medium-to-long term," says Sunidhi Securities research report. 

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To read the full report click on the attachment