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Tuesday, August 23, 2016

WONDERLA HOLIDAYS LTD: MAKING WONDERS !!!

Scrip Code: 538268 WONDERLA
CMP:  Rs. 414.50; Market Cap: Rs. 2,342.80 Cr; 52 Week High/Low: Rs. 429.85/ Rs. 245.25.
Total Shares: 5,65,00,670 shares; Promoters : 4,01,09,222 shares –70.98 %; Total Public holding : 1,63,91,448 shares –29.01 %; Book Value: Rs. 71.33; Face Value: Rs. 10.00; EPS: Rs. 9.60; Dividend: 20.00 %; P/E: 43.19 times; Ind. P/E: 51.12; EV/EBITDA: 23.79.
Total Debt: Rs. 7.49 Cr; Enterprise Value: Rs. 2,277.57 Cr.

WONDERLA HOLIDAYS LIMITED: Incorporated in 2002, Wonderla Holidays Ltd is one of the largest operators of amusement parks in India. The company came out with an IPO on April 2014 offering 1,45,00,000 equity shares of Rs. 10 each for Rs. 125 per share raising Rs. 181.25 Cr. The object of offer for sale was to set up an amusement park in Hyderabad and for other general corporate purposes. Wonderla Holidays Limited (Wonderla) is an operator of amusement parks in India. The Company owns and operates two amusement parks in Bangalore and Kochi under the brand name Wonderla. The Company also owns and operates a resort beside its amusement park in Bangalore under the brand name Wonderla Resort. The Company’s amusement parks offer a range of water and land based attractions catering to all age groups. Wonderla Kochi is located just 15 kilometers from Kochi city, is home for approximately 55 amusement rides. The dry rides at Wonderla comprise of land rides, sky rides and hi-thrill rides. Currently, Wonderla Holidays is in the process of setting up their third amusement park in Hyderabad. They also own and operate a resort beside the amusement park in Bangalore under the brand name 'Wonderla Resort' which has been operational since March 2012. Wonderla amusement parks offer a wide range of water and land based attractions catering to all age groups. They have 22 water based attractions and 34 land based attractions at Wonderla Kochi, situated on 92.95 acres of land and 20 water based attractions and 33 land based attractions at Wonderla Bangalore, situated on 81.75 acres of land. Wonderla Resort is a 'Three Star' leisure resort located beside their amusement park in Bangalore comprising of 84 luxury rooms, with amenities including banquet halls, a board room, conference rooms, a multi-cuisine restaurant, a solar heated swimming pool, recreation area, kid’s activity centre and a well-equipped gym. Wonderla Holidays Limited is locally compared with Nicco Parks & Resorts Ltd, Galaxy Entertainment Corp Ltd, Cineline India Ltd, Delta Corp Ltd, H.S India Ltd, T. Spiritual World Ltd, Oriental Hotels Ltd, B.L. Kashyap and Sons Ltd, Viceroy Hotles Ltd, Mahindra Holidays & Resorts India Ltd, Sterling Holidays & Resorts Ltd, EsselWorld, Appu Ghar, Queens Land, Vismaya, Tikuji-Ni-Wadi, Funtasia Water Park, Snow World, Jalavihar, Aquatica, Adlabs Imagica, Ramoji Film City and globally compared with The Walt Disney Company of USA, Twenty First Century of USA, Dreamworks Animations Plc of USA, Cedar Point of United states, Europa Park of Germany, Port Aventura of Spain, Six Flags Great Adventure and Wild Safari of USA, Blackpool Pleasure beach of United Kingdom, Everland of South Korea, Canada’s Wonderland of Canada, Ocean Park of Hong Kong, Efteling of Netherlands, Dreamworld on the Gold Coast of Australia, Busch Gardens of USA, Wisconsin Dells of USA.

Investment Rationale:
Wonderla Holidays is one of the largest amusement park companies in India and currently operates two amusement parks – one in Kochi and another in Bengaluru along with a resort adjacent to its Bangalore Park under the brand name 'Wonderla Resort'. Wonderla has 22 water-based attractions and 33 land-based attractions at Wonderla Kochi which is situated on 93.17 acres of land and 20 water-based attractions and 35 land-based attractions at Wonderla Bangalore, situated on 81.75 acres. The resort operated under the name, Wonderla Resort, is a ‘Three Star’ leisure resort located beside the amusement park in Bangalore comprising of 84 luxury rooms, with amenities including banquet halls, a board room, conference rooms, a multi-cuisine restaurant, a solar heated swimming pool, recreation area, kids’ activity centre and a well-equipped gym. Company has also acquired 49.57 acres of land for setting up the proposed amusement park in Ranga Reddy district of Andhra Pradesh. India has a large pool of young population. The median age of India’s population is around 27 years. The country has 61 % of its population under the age of 30 and 29 % below the age of 14 years. According to economic survey, India is expected to be the youngest Country in the world with the median age of population at 29 years by 2020. The young population is the main driver of consumer spending and looks for different modes of entertainment. Further, the child population is the influencing factor for parents to visit theme parks and play zones. Hence, this demographic dividend will benefit amusement parks as majority of its customers are in this age bracket. India has witnessed a steady increase in its per capita income over the years. Its per capita income at the current market price is estimated to increase at a CAGR of 15 % to Rs. 1.9 lakh in 2014-20E. Apart from rising per capita income, discretionary spend is also expected to increase significantly over the coming years led by higher disposable income, change in consumer spends and up-gradation of lifestyle. The share of discretionary spend is expected to increase from 59 % in FY10 to 67 % by FY20. Within discretionary spend, the share of leisure is expected to increase at a CAGR of 6.4 % to Rs. 8,98,400 Crore in CY 24. With a higher disposable income and increase in discretionary spend, entertainment companies like theatres and theme parks have been able to increase average ticket prices and also witness an improvement in non-ticket revenues over the years. The Indian amusement park industry is still at a nascent stage, the size of amusement park industry in India is estimated to be Rs. 2,600 Cr ($0.4 billion) with 150 amusement parks in India and globally the amusement park industry is of size of Rs 1,62,500 Cr ($25 billion), and this gives a huge opportunity for this industry. Indian amusement park industry got started with Appu Ghar in 1984. In late 90’s other large players like Essel World and Nicco Park started their operations in Mumbai and Kolkata respectively. Indian amusement park industry is growing in terms of footfalls though still at a very nascent stage compared to its global peers. It witnesses an annual footfall of 5.8 Cr to 6 Cr. The primary drivers to attract footfalls are size of the park, proximity of location and innovative offerings. Water parks are more popular in India due to the hot and humid weather. This Industry is broadly categorised into Large Parks, Medium Parks & Small Parks. Capex required for large parks are more than Rs. 70 Cr with land size of more than 40 Acres and can have annual visitors of around 5 lakhs. Large parks are usually located in Metros cities and in outskirts like Essel World of Mumbai, Nicco Park of Kolkata, Kishikinta of Chennai, Wonderla of Kochi & Bangalore, there are 16 t 18 such Large Parks in India. Medium Parks: Capex required for Medium parks are between Rs. 30 Cr to Rs. 70 Cr with required land size of between 10 to 40 Acres and can have annual visitors of around 3 to 5 lakhs. Medium parks are usually located in Outskirts of metros, Tier 1 Cities like GRS Fantasy Park of Mysore, Ocean Park of Hyderabad, there are about 40 to 50 such parks in India. Small Parks: Capex required for Small parks are about Rs. 30 Cr with required land size of around 10 Acres and can have annual visitors of around 3 lakhs. Small parks are usually located in Tier II cities, small towns, outskirts of metros and Tier 1 Cities like Fun N Food Kingdom of Dehradun, there are about 85 to 95 such parks in India. Wonderla has two parks that are mature i.e. Wonderla Kochi and Wonderla Bengaluru. Both parks have been able to clock RoCE of 35 %. Both parks have been able to maintain average EBITDA margin of 45 % in FY11-16 led by stable footfall, competitive pricing and operating leverage as 70 % of cost is fixed. Robust cash flow from these parks and lower capex spend are expected to enable Wonderla to not only support growth but also help the Company to fund its Hyderabad capex and losses in the initial years. WHL has also been able to increase its blended realisation per footfall at a CAGR of 15.6 % in FY11-16. A consistent increase in realisation and stable EBITDA margins has enabled the company to reduce its payback period from nine years in Kochi to 7.5 years in Bengaluru. The payback period in Hyderabad is expected to further reduce to seven years led by higher realisation and healthy EBITDA margins. WHL has commissioned a third park in Hyderabad. The park has better Connectivity compared to other parks in Hyderabad – it is close to the airport and located outside the ring road that connects to Hyderabad city. Hyderabad has 1.2 Cr people with per capita income of Rs. 1,32,862 which is one of the highest in south India. Coupled with favourable macros like GDP CAGR of 10 % in FY06-14, the park is expected to witness robust footfall and healthy realisation over the coming years. The Company has guided for footfall of 7 lakh and gross realisation of Rs. 990 leading to gross revenues of Rs. 69.0 crore. The company aims to achieve footfall of 10 lakh over the next three years. The restaurants at the Hyderabad park are owned by Wonderla. Hence, WHL will realise higher gross margins 45 % in the F&B segment, positively impacting overall margins. Wonderla also offers discounts ranging from 10-30 % for group bookings and corporate booking. It books revenue “net of discounts” and “net of taxes”, thus reflecting prudent accounting. Another innovative pricing used by Wonderla is “Fast Track” pricing strategy, which commands 100 % premium over regular prices. Also Company issues 250 tickets per day as fast track tickets, which reduce the average waiting time for a visitor substantially. Even though average realization is high in Fast Track prices, Wonderla is also planning to limit the number of tickets to 250 per day. Wonderla has set-up in-house capabilities in Kochi to design, develop and manufacture rides. This reduces the capex, maintenance costs and the down-time for a ride for Wonderla. The Management claims to manufacture rides at 1/3rd of the cost of procuring externally. Around 1/3rd of rides are manufactured in-house. As of January 31, 2014, company constructed 42 rides, of the total 55 attractions, Wonderla Kochi and Bangalore has 10 and 18 rides imported respectively. Balance is either in-house manufactured or domestically sourced. In-house manufacturing benefits Wonderla with certain cost efficiencies such as saving on import duties and other costs, besides improving the efficiency in rides maintenance. Wonderla has relatively low ticket price base, management expects 5-7 % and 8-10 % growth in footfall and ticket price respectively over the medium term at existing parks. From existing parks, management guides operational cash flow of about Rs. 40 Cr to Rs. 45 Cr pa. An improving economy, higher discretionary spend, rising footfall, better pricing power, growth in non-ticket revenues and limited competition are likely to remain key drivers of growth in FY16-18E. Given this scenario, it is expected that the Bengaluru and Kochi parks to grow at a CAGR of 13.0 % in FY16-18E. It is expected that the addition of the Hyderabad park which is operational from April 2016 and Wonderla resort which is expected to grow at 15.0 % CAGR in FY16- 18E to further drive revenues. Overall, it is expected that its net sales to grow at 30.8 % CAGR to around Rs. 351 crore in FY16-18E. Wonderla’s Return ratios like RoE and RoCE have historically remained healthy. Wonderla enjoys RoCE of more than 30 % supported by free cash generation from amusement parks as they attain maturity due to high EBIT margins, lower incremental capex and improved revenue mix.

Outlook and Valuation: 
Wonderla Holidays Limited is a part of the Kochi based V-Guard group. Wonderla Holidays is a very unique in business model with inherently strong profitability at an attractive valuation. Wonderla has high operating margins; high ROCE, niche & ambitious expansion plans make it an attractive stock to pick. Wonderla is a large park and there are only 15-16 large amusement parks in India. As there are no large amusement parks in the locations where Wonderla is situated, it is a huge advantage for the company. Though there are few small and medium sized parks in Kochi and Bangalore respectively, they cannot compete with Wonderla. Wonderla Chennai is in pipeline and company intends to expand its business operations and develop its brand ‘Wonderla’ by setting up new amusement parks in other parts of India and thereby cater to a wider customer base. It plans to capitalize on experience and expertise in the amusement park industry and leverage the existing goodwill associated with the brand to establish and expand amusement parks in newer geographies. Hence, management is in the process of identifying a suitable parcel of land in Chennai for setting up amusement parks. Amusement parks are one-day entertainment concepts in India, whereby visitors arrive in the morning and leave at the end of day, making the parks a “one day” attraction. However, with the introduction of company’s resort, it has become more of a “destination” park. Wonderla launched its first leisure resort by the name “Wonderla Resort” besides the amusement park in Bangalore in March 2012. The resort comprises of 84 luxury rooms with amenities including banquet halls, a board room, conference rooms, a multi-cuisine restaurant, rest-o-bar, a solar heated swimming pool, recreation area, kids’ activity center and a well-equipped gym. This resort has complete facilities compared to others, 24-hour dining facility, LCD television, Wi-Fi connectivity etc. It has four banquets spread across 8,900sqft, which can accommodate 800 guests and also has a board room. Thus, the resort can host multiple events like weddings, corporate meetings, parties etc. India, being one of the youngest countries in the world and enjoys demographic dividend with the median age of 26.5 years, has majority of its population between 15-59 years, which will be the biggest growth driver for this industry. Countries like the US, Japan and China have older population with median age of 37.1 years, 45.4 years and 35.9 years respectively. As per the study conducted by E&Y, in India, children are the key influences for amusement and theme parks visits. They generally come to parks in school groups or with families. But they constitute only 25 % of the park visitors and balance 75 % are adults. In India, around 28.50 % of the population lies in the age group of 0-15 years, 63.40 % in 15-59 years and 8.10 % in 60 years and above, respectively. Ticket sales form the major source of revenue stream for amusement parks in India. In India, the parks revenue constitutes areas like Food & Beverages merchandising which contributes 18 % as against global average of 34 %; Entry fees contributes 20 % as against global average of 33 %; Resort rentals and others contributing 2 % as against global average of 33 %. Globally, entry fee, food and beverages and resorts and rentals contribute similar proportion to revenue. For Wonderla, Food and Beverages contribute 3-4 % of the total revenue. Wonderla management has maintained its guidance of achieving footfalls of 65 lakh in FY2017 from the Hyderabad Park, while it will take some time for revival in footfalls in the Bangalore and Kochi parks as price hikes will get absorbed in the coming quarters. Also, the management is planning to add two new rides in Kochi by the end of Q2FY2017 with an investment of Rs. 25 to 30 crore. Also, it is planning a capex of Rs. 90 crore at the proposed Chennai park. The commencement of work for the Chennai park will start once the project is finalised and detailed planning is done. The funding of the capex will largely be done through the internal accruals. Company would initiate extensive promotional activities to improve the footfalls at both the existing parks. Overall, the company expects its matured park footfalls to grow by 4 % to 5 % in the coming years. The non-ticket revenues would continue to support the overall revenue growth. OPM is expected to remain lower in FY2017 and is expected to improve gradually in FY2018 once Hyderabad Park attains certain scale of operations. Bengaluru resort is performing better as its revenue grew by 11 % YoY in Q1FY2017, with an occupancy ratio of 67 % as against 48 % in Q1FY2016. The average room rentals of the resort stood at Rs. 4,608 per room per day as against Rs. 5,147 per room per day. The management expects the Bangalore resort’s performance to improve in the coming quarters. It also expects gradual improvement in the profitability of the resort. In all on financial side for Q1FY2017, Wonderla Holidays revenue grew by 29.6 % to Rs. 88.9 Cr. It’s operating profit margin (OPM) contracted to 44.1 % in Q1FY2017 from 60.7 % in Q1FY2016. The commissioning of the Hyderabad Park in April led to a sharp increase in the overall operating cost as advertisement & promotional spends and direct operating expenses almost doubled YoY. Also, other expenses included Rs. 4.5 Cr provisioning toward service tax, leading to a significant decline in OPM during the quarter. Operating profit fell by 6 % YoY to Rs. 39.2 Cr and the Profit After Tax declined by 20 % YoY to Rs. 22.5 Cr. Wonderla enjoys a moat as this sector has high entry barrier due to huge capital investment and limited number of large amusement parks in India coupled with favourable demographics and rising discretionary spend augur well for WHL. It is expected it to witness a sharp improvement in footfall and realisation led by addition of new parks and Favourable demographics. Compring Wonderla with its peers on a PE basis, it appears that enough valuation headroom is left, given that larger USlisted peers like Six Flags, Cedar Fair trade between 14x27x on CY14 basis. Amusement parks attain maturity; they can throw up significant cash flows since they require only maintenance capex: for instance, in FY10 and FY11, when there was no large ongoing project, capex/sales was just 5 %7 % which helped generate large free cash flows. Further, WHL has been able to generate higher cash flow driven by healthy margins at mature parks. As a result of high cash flow generation, the company has been able to keep its debt to equity lower and also been able to expand through internal accruals. WHL has consistently maintained an EBITDA margin of 45.0% (highest among Indian and global peers). Further, a healthy balance sheet (0.3x D/E vs. 1.46x for Adlabs), strong cash flow generation and revenue & EBITDA CAGR of 30.7 % and 37.5 %, respectively, in FY16-18E demands premium Valuations. At the current market price of Rs. 414.50, the stock is trading at a PE of 36.04 x FY16E and 25.27 x FY17E respectively. The company can post Earnings per share (EPS) of Rs. 11.50 FY17E and Rs. 16.40 in FY17E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.

KEY FINANCIALSFY15FY16FY17EFY18E
SALES ( Crs) 181.90205.40292.30367.40
NET PROFIT (₹ Cr)50.6059.8065.2092.80
EPS () 9.0010.6011.5016.40
PE (x)44.1037.3034.3024.10
P/BV (x)6.305.504.603.90
EV/EBITDA (x)25.4025.3020.9013.50
ROE (%) 20.00 15.8015.6020.00
ROCE (%)37.7015.6023.0029.30

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*As the author of this blog I disclose that I do not hold WONDERLA HOLIDAYS  LTD in my of the portfolios.

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This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible. 


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I confirm that I shall not deal or trade in securities mentioned in this article within thirty days before and five days after the publication of this article. I also confirm that I will not deal or trade directly or indirectly in securities mentioned in this article in a manner contrary to the ideas put forth in the article. I have not received any financial compensation for writing this article.
 

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Saturday, August 13, 2016

ASHAPURA INTIMATES FASHION LTD: THE NEXT PAGE INDUSTRIES !!!

Scrip Code: 535467 AIFL
CMP:  Rs. 301.55; Market Cap: Rs. 587.03 Cr; 
52 Week High/Low: Rs. 327.00 / Rs. 215.65
Total Shares: 1,94,67,240 shares; Promoters : 1,31,86,640 shares – 67.74 %; Total Public holding : 62,80,600 shares – 32.26 %; Book Value: Rs. 31.63; Face Value: Rs. 10.00; EPS: Rs. 6.36; Dividend: 10.00 %; P/E: 47.41 times; Ind. P/E: 33.88; EV/EBITDA: 23.42 times cash 76Cr
Total Debt: Rs. 59.21 Cr; Enterprise Value: Rs. 643.37 Cr.

ASHAPURA INTIMATES FASHION LIMITED: The Company was founded on July 17, 2006 and is headquartered in Mumbai, India. It was incorporated as Ashapura Apparels Private Ltd and changed its name to Ashapura Intimates Fashion Ltd in 2012. Ashapura Intimates Fashion Ltd is engaged in the business of designing, branding, marketing and retailing intimate garments such as loungewear, bridal night wear, honeymoon sets, bathrobes and night wear. Ashapura Intimates sell their products such as loungewear, bridal night wear, honeymoon sets and bathrobes under the brands Valentine and N-Line. Also night wear, maternity feeding night wear and bridal night wear (two pieces) are marketed under the brand Night & Day and sportswear, women’s innerwear and lingerie’s under the brands Valentine Sportswear, Valentine Secret Skin & Valentine Pink. Company has in house design studio for developing products and creating styles to remain updated on consumer tastes and fashion trends. The company came out with an IPO on BSE SME exchange on March 28, 2013 offering 52,50,000 equity shares of Rs. 10 each for Rs. 40 per share in shares lot of 3000 shares per lot, raising Rs. 21 Cr. The shares of the company got listed on BSE SME on April 15, 2013 making a high of Rs. 48 on listing day and got migrated to BSE Main Board in June 03, 2015 and got listed on NSE from December 02, 2015. The object of offer for sale was to set up 10 Exclusive Brand Outlet (EBO’s) to fund branding and marketing set-up, to make an investment in the equity shares of Group Company, to fund the modernization of machineries, to meet the incremental working capital requirements, to meet Issue expenses and for other general corporate purposes. Ashapura Intimates Fashion Ltd has till date not declared any Split in its face value of shares and not declared any bonus shares. Momai Appearls Ltd is a listed subsidiary of AIFL; Momai was incorporated in 2010 and is engaged in manufacturing of Intimate garments. Momai Appearls Ltd came with an IPO in 2014 offering 38,46,400 equity shares of Rs. 10 at Rs. 78 per share raising Rs. 30 Cr, it got listed on NSE SME on October 16, 2014 at Rs. 78 made a high of Rs. 82.00, Momai have not declared any split in face value of its share and not declared any bonus shares. Ashapura Intimates Fashion Ltd exports its products in Middle East, Africa, Canada. ASHAPURA INTIMATES FASHION LTD is locally compared with Women’s Next Loungeries Ltd, Lovable Lingerie Ltd, Page Industries, Maxwell Industries, Cantabil Retail India Ltd, Future Lifestyle Fashion Ltd, Provogue (India) Ltd, Lux Industries Ltd, Riba Textiles Ltd, Arrow Textiles Ltd, Momai Apparels Limited and Globally with L Brands Inc of USA, GAP INC of USA, GUESS? INC of USA, Cato Cororation of USA, ANN INC of USA, New York & Company Inc of USA, Christopher & Banks Corporation of USA, Ascena Retail Group Inc of USA, Chico’s FAS Inc of USA, Frederick’s of Hollywood Group Inc of USA, Cache Inc of USA, Caely Holdings Bhd of Malaysia, Teo Guan Lee Corporation Bhd of Malaysia, Asia Brands Berhad of Malaysia, Voir Holdings Berhad of Malaysia, Kimuratan Corporation of Japan, Atsugi Company Ltd of Japan, Shanghai Lanshitian Model Desig Co. Ltd of China, Polywell Textile & Garments CO Ltd of China, Meimei Fashion Garments Hong Kong, Hanes Plc of Europe, Vinatex Danang JSC of Vietnam, PhuThinh NhaBe Garment JSC of Vietnam, Season Pacific Holding Ltd of Cayman Islands, Takson Holdings of HongKong,  Wonpung Mulsan Co Ltd of South Korea.

Investment Rationale:
Incorporated in 2006, Ashapura Intimates Fashion Limited (AIFL) is in the business of designing, trading, job contract manufacturing, branding, and marketing and selling of intimate garments such as loungewear, bridal night wear-honeymoon sets, bathrobes and nighties since incorporation. The company expanded its product portfolio by adding other intimate garments such as sportswear, women's innerwear including lingerie. It now plans to foray into a new product category i.e. kids' innerwear having cartoon characters. AIFL's products are under the brands "Valentine" and "N-Line" and are available through large network of distributors across India as well as other countries. Its products such as nighties, maternity feeding nighties and bridal night wear (two pieces) are marketed under the brand called "Night & Day". Further in the year of 2011, the company  started marketing of sportswear, women's innerwear and lingerie's under the brands "Valentine Sportswear", "Valentine Secret Skin" & "Valentine Pink" respectively by leveraging its existing marketing network. The Indian Textile and Apparel (T&A) industry has emerged from the economic slowdown and is regaining momentum. T&A, being an important industry, contributes around 5.4 % of India’s GDP. The total T&A industry was worth US$ 9,500 Cr or Rs. 5,21,000 crores in 2013 and is estimated to grow at a promising Compound Annual Growth Rate (CAGR) of 9 % in the coming 10 years. This includes both the domestic market and exports. The value of the domestic T&A market is US$ 5,900 Cr or Rs. 37,51,000 crores which exceeds the value of the exports market, reflecting higher domestic demand and consumption. The apparel sector comprises 70 % of the total domestic market, which in turn becomes the result of an increase in the per capita consumption by Indian consumers. The Indian innerwear market is estimated to grow at a CAGR of 13 % to reach Rs. 59,540 Cr over the period of 2013-23 and women innerwear market is estimated to grow at a CAGR of 15 % to Rs. 44,000 crores over the same period. The women’s innerwear market is driven by value-added innerwear products and contributes around 60 % to the market. The women’s innerwear market is worth Rs. 10,880 crores, and is growing at a promising CAGR of 15 %. The growing number of working women and the increased share of western wear in their wardrobe have propelled this growth. Further, with the increase in exposure, there is an increased demand for better fits and quality alongside the demand for a wider range of colours, styles and accessories. Western wear usually encompasses specialized innerwear, which the branded players can provide for the most part. Brand consciousness is no more restricted to external apparel. Among women’s innerwear brands, strong single brands emerge for bottoms and heritage innerwear brands are preferred for bras. Women are increasingly getting conscious about the brands and styles of their intimate wear. In fact, this changing preference is no longer restricted to just the metros, but has spread to mini metros, tier -I, -II and -III cities. This openness to indulge in branded lingerie has led to a growth in the number of international and domestic innerwear brands present in India. The men’s innerwear market is pegged at Rs. 6,870 crores and is growing at 9 %. Even in this segment various domestic and international brands can be found. Various apparel brands and retailers have extended their product portfolios to men’s innerwear segment to leverage its growth. Apparel players predominantly focusing on active wear, casual wear and even formal wear have launched dedicated sub-brands in men’s innerwear. Consumers mostly purchase branded vests and briefs or boxers, which are the largest category with offerings from most leading innerwear brands. In the men’s wear and women’s innerwear segment, the Company has made its presence felt. The growing demand and spending capacity of consumers has leaded them to spend on these products without thinking of the pocket pinch. It is no longer treated as merely an undergarment but is worn as a fashionable part of clothing that can be flaunted. The company has planned to launch new branch for men's lounge wear category. Innerwear has moved out of the basic necessity bracket and is now associated with a feel good factor. Indian consumers have come out of the shyness cocoon and are willing to experiment with new varieties, styles, colours and brands. This growth in demand has carved out a potential market for innerwear in India. Ashapura Intimates Fashions Ltd has dedicated design studio and develops product taking into consideration the demographic, traditional and geographical aspects. The products are sourced from selected vendors with stringent quality control measures. Products sold to customers goes through the centralized warehousing facility in Thane. The company is focusing on brand promotion through various hoardings, event sponsorships, special event advertisements and advertising in selected print media. It has pan-India presence with a network of 130 distributors and 15 carrying and forwarding agents catering 15,000 point of sales. Company sales its products through various online shopping portals as well as through its own website, viz www.valentineclothes.com. The company also has a vertically integrated manufacturing facility admeasuring 2,25,000 sqft with a capex of Rs. 27 Cr in Gujarat, this is one of the biggest capacity in production and warehousing in Lounge wear segment in India. Currently, loungewear, bridal night wear, honeymoon sets and bathrobes are marketed under the brands "Valentine" and "N-Line" while nighy, maternity feeding nighties and bridal night wear are marketed under the brand "Night & Day". Ashapura forayed into marketing of sportswear, women's innerwear and lingerie's under the brands "Valentine Sportswear", "Valentine Secret Skin" & "Valentine Pink" in 2011. The company is creating “Valentine” as family intimate ware brand. The growing demand and increase in spending capacity of consumers has leaded to strong growth in this sector also, shifting demographics, shrinking households, a greater number of educated consumers, and the growing number of working women, their ability to adopt changing fashion trends, rising disposable incomes, awareness levels, new retail formats, technological innovations and changing consumer behavior are the trends fuelling the growth of the domestic market.

Outlook and Valuation: 
Ashapura Intimates Fashion Limited (AIFL) was incorporated in 2006, was listed on the BSE SME IPO segment in 2013 and, the company within two years got migrated to BSE Main Board in June 2015. The company has head office in Mumbai and its central warehousing facility is Located at Thane, India. AIFL markets and retails a large variety of products catering to all age groups of men, women and children. Loungewear has been Valentine’s flagship product and account for 63 % of total sales. These products are made with fabrics such as viscose, knits, woven, satin, georgette, stretched and terry material, in vibrant styles. The company creates 1,000 designs in its summer collection and 1,500 designs in its winter collection with prices range from Rs. 599 to Rs. 3000. It's Valentine is its premium brand which is priced above Rs. 110. AIFL has recently brought different brands like “Night & Day” and ”N-Line” under “Valentine” brand to improve customer awareness and brand recognition. It's brand N-Line is priced between Rs. 699 and Rs. 1099. The promoter has expertise and has experience of over two decades which helps the company to design products and manage distribution effectively. The Company has strong network of 130 distributors, including an overseas distributor, 10 C&F agents and 65 salesmen all over India. It has over 15,000 point of sales, tie-ups with various MBOs along with online presence. AIFL has developed expertise in designing and distribution and outsource its products from selected vendors with stringent quality control. AIFL has adopted Asset Light business model. AIFL has a strategic manufacturing tie-up with its subsidiary Momai Apparels for high end and complex design products and sources 60 % of its requirements form it. Momai apparel has recently doubled its manufacturing capacity with new facility at Vapi, situated at Gujarat to 70,00,000 pieces per annum. AIFL has own design team and designs are made in one year advance with working on conceptualization of fashion trends, choice of fabric, colour, designing pattern, look and feel of the product etc. The design is critical in lounge wear and single product normally has five to six different Colours and fabric patterns. AIFL has 75 % sales from summer season and 25 % sales from winter products. The company is able to break up the inventory cycle due to seasonality in the business, significantly reducing the working capital requirement of the company going ahead. Ashapura used to develop 1500 designs every six months ending September and March till 2015, impacting working capital requirement. The company has split summer designs into monthly distribution with 150 designs per month now, reducing inventory and Debtor levels. It also helps in managing order flow and increasing customer footfall. The company has strategic tie-ups with larger MBOs such as Vijay stores, Globus, Central, Chunmun, Big Life and La Lingerie and is planning to add Lifestyle and Reliance Trends into this list. Apart from e-commerce, it is aggressively expanding through Exclusive Brand Outlet (EBO). It currently has 25 EBO’s and is planning to increase it to 400+ stores in next three years. The intimate wear industry is still largely fragmented and the demand is shifting towards fashionable intimate wear with emphasis on branding. The migration to organised market in lounge ware is expected at higher rate due to lower price difference of 15 % to 30 %. EBO's will help the company to display wider products and create stronger brand along with margins improvement, EBO has 10 % to 12 % higher EBITDA margins. Besides EBO the company also has MOU’s with leading online shopping sites like Myntra, Jabong and HomeShop 18, company also has its own website. The company has strategically taken a stance on consolidating the business by focusing on improvement of margins, reduction of working capital and reducing debt which is reflecting in their financials for the year. The management and shareholders have approved to merge its listed subsidiary Momai Apparels Ltd with AIFL. Accordingly, AIFL will issue 10 fully paid up equity shares of Rs. 10 each for every 27 shares held in Momai Apparels Ltd, this means AIFL will dilute 10.10 % of AIFL’s equity, but looking at the scheme it will be beneficial for AIFL shareholders as the Networth of AIFL was Rs. 49.20 Cr with total revenue of Rs. 179.18 Cr in 2014-15 and for Momai the Networth was Rs. 61.41 Cr with total revenue of Rs. 123.10 Cr. This scheme is the backward integration of AIFL business thereby consolidating its business operations, this will improve competitive position of the combined entity in the market, great utilisation of cash and cost reduction, opportunity to leverage brand and goodwill, access to broader market, the scheme will create greater integration and greater financial strength and flexibility for the amalgamated entity. Last year, AIFL has allotted 5 warrants of face value of Rs. 3.25 Cr each aggregating to Rs. 16.25 Cr to the famous brand equity master Bennet Coleman & Company (BCCL) on preferential basis on October 13, 2015 at a conversion price of Rs. 262.91 or at Formula price being the price per share equal to the weighted average of closing price of the shares quoted on BSE during 26 week preceding the expiry of 17 months from the date of allotment of warrants i.e February 17, 2017. The company raised the warrant money for its Brand building, and has appointed new Advertising agency for its promotion & advertisement of its brand. AIFL has till now utilized around Rs. 1.11 Cr with Rs. 15.13 cr still remaining as unutilized money. For the quarter ended June 2016, the Company registered net sales of Rs. 52.12 Cr. Net profit stood to Rs. 3.11 Cr. During the quarter, operating profit is Rs. 6.64 Cr. Profit before tax (PBT) at Rs. 5.02 Cr. The company also registered an increase in its reserves from Rs. 29.73 Cr a quarter and year ago to Rs. 42.07 Cr this quarter a increase of 41.50 %. The company has reported an EPS of Rs. 1.59 as against an EPS of Rs. 1.56 in the corresponding quarter of the previous year. The company has a very less free loat of 62,80,000 shares so any positive news could trigger a upper circuit. At the current market price of Rs. 301.55, the stock is trading at 48.68 x FY17E and 41.42 x FY18E. Earnings per share (EPS) of the company for FY17E could be seen at Rs. 6.20 and Rs. 7.28 in FY18E. Ashapura Intimates Fashion Limited (AIFL) has created niche market for lounge wear through brand name “Valentine” and is in the business of designing, branding, marketing and retailing of clothing products such as lounge wear, sleep wear, innerwear and sportswear. The company is targeting growth through retail, EBO and e-commerce with focus on design, distribution and brand development. AIFL would be one of the major beneficiaries of growing organised retail and e-commerce in India with its strong brand and unique product portfolio. It is expected that the company will keep its growth story intact in the coming quarters also.  

KEY FINANCIALSFY15FY16 FY17EFY18E
SALES ( Crs) 178.60198.20220.10 244.30 
NET PROFIT (₹ Cr)8.6710.2012.1014.20
EPS () 4.445.236.207.28
PE (x)67.5657.3648.3841.20
P/BV (x)9.1011.8911.1011.40
EV/EBITDA (x)22.8721.7019.8518.17
ROE (%) 17.60 20.70 24.6028.90
ROCE (%)14.58 38.6538.6538.70

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*As the author of this blog I disclose that I do not hold  ASHAHPURA INTIMATES FASHIONS LTD in my any of the portfolios. 

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As a Disclosures I Confirm that : 
I confirm that I shall not deal or trade in securities mentioned in this article within thirty days before and five days after the publication of this article. I also confirm that I will not deal or trade directly or indirectly in securities mentioned in this article in a manner contrary to the ideas put forth in the article. I have not received any financial compensation for writing this article.
 

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