Khambatta Securities' research report on Creative Peripherals and Distribution
Creative Peripherals and Distribution Limited (CPDL) is a specialist distributor of consumer electronic and lifestyle products with a portfolio of 3,000 SKUs and 5,000 partners. CPDL has carved out a niche for itself in the consumer electronics distribution space as a market entry specialist for global niche brands. CPDL designs and manufactures consumer and enterprise electronic products under licence from Honeywell. The licensed manufacturing business is poised to grow with potential for further partnerships. CPDL’s B2B e-commerce platform Ckart, a first-of-its-kind in India, enables its existing and new customers to “transact, discover and share” with other customers digitally. Besides the promise of becoming a key growth driver, Ckart will enable CPDL to reduce its inventory and debtor days by facilitating direct transactions between users.
We expect relatively muted sales growth in FY21 as a fallout of the COVID-19 pandemic. Growth is seen to accelerate from FY22 onwards as the global economy recovers. CPDL’s management has set a goal to reach Rs 1,000 crore in revenues by FY23 with a half of it seen come from the licensed manufacturing business. EBITDA margin expansion led by improved product mix, increase in licensed manufacturing, and scaleup of the platform business (Ckart), and improvements in the working capital cycle will positively impact cash flow generation and drive return ratios. The CPDL stock currently trades at an attractive forward P/E level of 7.4x FY22E EPS. Valuing at 11.0x FY22E EPS of Rs 16.12, our target price of Rs 177 informs a BUY rating with an upside potential of 49%.
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