CMP 484 ; SENSEX 17025
As we all know, the so-called 'concept stocks' or the 'consumption story' scrips have been a tremendous hit with the Markets particularly in the last 2-3 years. These scrips whether they be the likes of Tata Coffee, Jubilant Foodworks, Page Industries, TTK Prestige, Hawkins, Titan Industries etc or even the earlier fancies like Educomp, Everonn, Career Point etc have all been characterised by fierce market momentum in their prime. This, more often than not, led to stratospheric valuations due to the high quantum of trader-froth thus often catching the long term retail investor on the wrong foot. Thus, it becomes all the more critical to take a step back and try and determine the best entry price before investing in these Stocks. We shall attempt to do so now for LOVABLE LINGERIE.
TECHNICALS:
The data for the Scrip is limited but the overbearing feeling that I get from the available Charts is one of consolidation or at best sideways with a positive bias. On the downside there is a good support at 100 DMA (SMA) levels ie 440 levels followed by a much stronger support at 395 levels. Below this, the rock solid support seems to be at 371 levels. On the upside, the first resistance is pretty close to CMP ie at 491 levels followed by 508; beyond 508 the next resistance could well be at 548 levels.
FUNDAMENTALS:
The Company's current products are in the Women's innerwear niche segment and enjoy substantial Brand Pull particularly for the mid range products; the main positives for the Company, in addition to the Brand facet, is that the demographics of the Indian Consumer is fast changing both in terms of quantity as well as aspirational quality thus enabling a ready demand reservoir for the Company's products; guided 30% CAGR topline over the next couple of years as well as the plateauing off in the raw material costs this fiscal could well see the Company deliver 18-20% Operating Margins; the main negatives is that the high end product is likely to see incremental competition from established premium Brands and the mid segment from the unorganised Sector products. Whether the Company is able to leverage its volume growth and quality to deliver the guided Earnings growth remains to be seen.
Q1FY 2012 results have been good and the Company could do an EPS of 18 approx this fiscal thus putting it at a valuation of 27x Current Year at CMP 484. This translates to a valuation of about 21x FY13E at CMP 484. To be frank, I would be uncomfortable buying in at these levels. In my opinion, fair value for the scrip currently would be in the 345-370 range and that too is a bit of a stretch at 15x-18x FY13E. However , Markets have a mind of their own and it seems unlikely that we will get 350 levels on the Scrip any time soon.
Therefore, it would be a good idea to patiently wait for the scrip to correct (and believe me, EVERY scrip corrects) and pick it up in staggered lots in the range 350-400 for your long term Portfolio.
TECHNICALS:
The data for the Scrip is limited but the overbearing feeling that I get from the available Charts is one of consolidation or at best sideways with a positive bias. On the downside there is a good support at 100 DMA (SMA) levels ie 440 levels followed by a much stronger support at 395 levels. Below this, the rock solid support seems to be at 371 levels. On the upside, the first resistance is pretty close to CMP ie at 491 levels followed by 508; beyond 508 the next resistance could well be at 548 levels.
FUNDAMENTALS:
The Company's current products are in the Women's innerwear niche segment and enjoy substantial Brand Pull particularly for the mid range products; the main positives for the Company, in addition to the Brand facet, is that the demographics of the Indian Consumer is fast changing both in terms of quantity as well as aspirational quality thus enabling a ready demand reservoir for the Company's products; guided 30% CAGR topline over the next couple of years as well as the plateauing off in the raw material costs this fiscal could well see the Company deliver 18-20% Operating Margins; the main negatives is that the high end product is likely to see incremental competition from established premium Brands and the mid segment from the unorganised Sector products. Whether the Company is able to leverage its volume growth and quality to deliver the guided Earnings growth remains to be seen.
Q1FY 2012 results have been good and the Company could do an EPS of 18 approx this fiscal thus putting it at a valuation of 27x Current Year at CMP 484. This translates to a valuation of about 21x FY13E at CMP 484. To be frank, I would be uncomfortable buying in at these levels. In my opinion, fair value for the scrip currently would be in the 345-370 range and that too is a bit of a stretch at 15x-18x FY13E. However , Markets have a mind of their own and it seems unlikely that we will get 350 levels on the Scrip any time soon.
Therefore, it would be a good idea to patiently wait for the scrip to correct (and believe me, EVERY scrip corrects) and pick it up in staggered lots in the range 350-400 for your long term Portfolio.
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