Monte Carlo Fashions Ltd. (MCFL) is one of the leading apparel brands in India
which primarily caters to the premium and mid-premium branded apparel
segment for men, women and kids. The company offers a comprehensive line of
woollen, cotton and cotton-blended knitted and woven apparel and home
furnishings under the Monte Carlo brand. The companys net sales have grown at a CAGR of
16.3% over FY2012 to FY2014. Although, the EBIDTA margins have declined
from 22% in FY2012 to 18.7% in FY2014, we believe they are at sustainable
levels. The net profit has grown at a CAGR of 5.8% over FY2012-FY2014. At the
lower end of the price band, the stock is valued at ~24.8x PE on FY2014
earnings which we believe is fair considering its i) strong brand image, ii) strong
distribution network, iii) healthy balance sheet and iv) widening product portfolio.
We recommend Subscribe to the issue at the lower end of the price band from a
two-year perspective. From a one-year perspective, we see limited upside
potential as valuations seem to be fair.
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