Rupa and Company has target of Rs 175: PN Vijay

Vijay told CNBC-TV18, "Rupa and Company is part of the Indian innerwear industry, which is growing pretty significantly because it is a total demographic play as far as India is concerned and as the lifestyles changed, the unbranded ones go to the branded. The industry has been growing at about 30%, it is now about Rs 15,000 crore and it is equally divided between men’s innerwear and women’s lingerie in terms of size but in terms of value women is about 70% but men are getting more and more branded at a faster pace."

He further added, "The company’s investors are familiar with Page Industries which is the licensee of Jockey and that of course has been a favourite with the FIIs for one and it is trading at very high valuations. The new kid on the block is of course Lovable Lingerie , which is totally into women’s innerwear which is also trading at pretty high valuations and it is favourite among retail investors."

"Rupa incidentally is the oldest and in terms of size and reach, the biggest in this industry. It is Calcutta based and the thing about Rupa has been they have been quite silent but they have a huge retail network. In terms of retail I am told apart from the likes of Lever and Colgate, they have the highest retail touching points in India. They are growing at about 30%."

"In the coming years, the low cotton prices are working in their favour and they have been working hard to move into the premium segment to improve their EBITDA margins for example in the year that has just ended, their percentage of the premium brands would be about 11 as compared to about 7 two years ago. So this is leading to improved EBITDA margins, which is again supported by weak cotton prices."

"The share is around Rs 140, which is about 23-24 price earnings but about 25% discount to the peers at its Page and Loveable and I expect a CAGR of about 35% due to organic growth, they are cash rich, they can go in for some acquisitions and I think some sort of a recognition and re-rating of the stock because it is a clear FMCG play with a very strong brand and presence. I am targeting about Rs 175 for the stock based on continued weak cotton prices and a move up into the premium market."

Disclosure: I have personal holding in Alembic Pharma.