Accumulate Liberty Shoes, says Ashish Chugh

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Accumulate Liberty Shoes, says Ashish Chugh

Accumulate Liberty Shoes, says Ashish Chugh, Investment Analyst, Author of Hidden Gems.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about Liberty Shoes See messages about Liberty Shoes Liberty Shoes BSE | NSE 29/05/12 Are Mutual Funds betting on Liberty Shoes?

Accumulate Liberty Shoes , says Ashish Chugh, Investment Analyst, Author of Hidden Gems.

Chugh told CNBC-TV18, "Liberty Shoes as far as the financial performance is concerned for the past four years it has been lackluster but the stock price also has been lackluster for the past six months. If you see the stock price consolidating in the range of about Rs 100-125, we have seen a bounce in the market and many stocks have doubled. Inspite of that, this stock is stagnated at these levels for a long time. Now this is mainly because of the fact that there has practically been no growth in revenues or profitability of the company for the past four years."

He further added, "This company has got six manufacturing plants, it is a very well-known brand name and it has got a number of brands, which are well recognized like Force 10 and Cooler and about a dozen others, which when you say Liberty, everybody recognizes these brands. So off late what we have seen is that given India's strong consumption story, number of companies which have good visibility, good brand, these companies are getting re-rated, stocks like VIP Industries, Hawkins Cooker and also TTK Prestige, they have moved up. Ofcourse this has to be backed by the financial performance, without financial performance the market will not re-rate you but off late."

"We have been hearing a number of aggressive steps being taken by the management, they are talking about opening 100 more Liberty exclusive stores by March 2011, they currently have about 350 exclusive stores and the product is sold through about 60,000 retail outlets. Given the fact that the management has now got aggressive, they are talking about opening more stores, they are talking about doubling the production levels from about 50,000 to one lakh pairs a day in the next three years and ofcourse if it is backed by the financial performance of the company, we may see rerating of the stock from these levels of about Rs 110-115, I don't see investors too much losing from these levels, marketcap at a current price is close to Rs 200 crore."

"I think given the brand value and the access which the company has, I think the marketcap at Rs 200 crore looks extremely attractive for investment. The caveat here is that the rerating will happen only when signs of better financial performance start emerging from the company. So till that time, it may be a stock to accumulate at about Rs 110-115 levels."

Disclosure: I have got investments in the stock of Thirumalai Chemicals, I don't hold Liberty Shoes.