Last Updated : Jan 09, 2012 12:29 PM IST | Source: CNBC-TV18

Accumulate SuperHouse: Ashish Chugh

Accumulate SuperHouse at these levels, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Accumulate SuperHouse at these levels, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "SuperHouse is a leading exporter of leather goods and leather shoes from the country. Company is asset rich, company has got 13 manufacturing plants and all of them located in the state of Uttar Pradesh. The company has got 4 subsidiaries which are located in US, UK, Middle East and Romania."

He further added, "This company manufactures shoes under the brand Allen Cooper and they make safety shoes under the double duty brand. Last year this company acquired a UK based company called Briggs Industrial Footwear which manufactures and markets safety footwear under various brands like Himalayan, Caterpillar and Timberland."

"If you see the financials of the company, in FY11 sales were about Rs 450 crore. PAT was about Rs 17 crore, EPS was around Rs 15.5. The first half of the current financial year sales are up by about 11% to Rs 238 crore and profit after tax is up by about 35% to Rs 10 crore. EPS on a 12 month basis is about Rs 19. So at a current price of about Rs 40-42 the stock is available at a PE multiple of just about 2-2.5."

"If you see the 10 years track record the company has been able to increase both sales and profitability on a consistent basis. In no year is the company sales lower than the previous year. There is a slight variation in the PAT in 1-2 years but barring that the sales and profitability have grown on a consistent basis recession or no recession. The promoters holding have gone up by 9% in last 3 years from 45% to 54%."

"As against the book value of about Rs 125 the stock is available at Rs 40-42. Company has been paying dividends for the past 6 years on a consistent basis. Last year it paid a dividend of about 15%. So you have a dividend yield of close to 4% at the current market price and the company derives roughly 80% of the revenues from exports. So given the fact that in the last 3-4 months rupee has depreciated from 45-46 to current rate of 53-54. I think this will be beneficial to the company at least in the short term and the undervaluation of the company is evident from the fact that last year it paid a tax of about Rs 9 crore."

"The market cap of the company is just about Rs 45 crore. You will not find too many companies which are available at 5 years of tax payment. Last years cash profit was about Rs 27 crore as against a cash profit of Rs 27 crore in 1 year the market cap is just about Rs 45 crore, which is less than 2 years of cash profit. So in spite of all this the reason the stock is trading at a PE multiple of 2-2.5 is probably because of the apathy of the promoters towards minority share holders."

"Here the dividend payout ratio has just been about 10%. So we are sitting on a base case scenario with this company, there is a potential for this company to command higher valuations provided promoters choose to share higher profit with the minority share holders. So in any case I don

First Published on Jan 9, 2012 12:26 pm
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