Independent Research Analyst

Mamta Verma

DC India Research

DC India Research LLP (DCIR) is based out of Mumbai, India.

We specialize in providing customized, independent research across listed and unlisted companies in India across equities and credit including sectoral research. Our customers include India focussed PE funds, special situation funds, domestic AMCs, Wealth Advisory& PMS firms, Rating Agencies & Investment Advisors. 

The DCIR board consists of prominent names from the industry as well as CIO’s of Hedge funds.

Equity Bottom-Up

Rupa and Company Ltd (Rupa) incorporated in 1985, has established a strong brand recall by offering bouquet of brands under umbrella brand 'Rupa' in the economy, mid-premium and premium segments. The company follows efficient business strategy by outsourcing low end and labour intensive work.Rupa is strengthening its position in super premium segment by licensing of foreign brands such as ‘FCUK’ and ‘Fruit of the loom’.After establishing strong foothold in men's innerwear segment, Rupa is looking at strengthening its female innerwear business in future and is open to grow this segment through inorganic route in domestic market.We believe that Rupa being a leading brand in Indian innerwear market would be one of the major beneficiaries of GST and has potential to grab market share from unorganized space which is 50% of the total market. Operating &amp; Financial Summary - <ol><li>
Business - The Indian innerwear market is shifting from a price sensitive market to a fashion quotient market. Subsequently, Rupa has gradually shifted from mass segment products to the premium segment with strategic tie-ups with various foreign brands. Rupa has been constantly focusing on foraying into premium brands to enhance its operating margins. In addition to existing licensed brand of FCUK, Rupa recently entered into a license agreement with Fruit of the Loom Inc (FOTL), a unit of Berkshire Hathaway, to manufacture, distribute and sell innerwear and outerwear products under their brand name. The price points for the brand would be in the range of Rs.150-400 per piece and would be positioned as a ‘value premium’ brand. We believe premiumisation of brands will improve margin profile, since premium brands command higher margin than mass segment products (~ 5% higher). 
</li></ol><ol start="2"><li>
Earnings – Over the 5-yr period FY13-18, Rupa has delivered CaGR growth of ~7%, 5%, 6% in Revenues, EBITDA &amp; PAT respectively. 
</li></ol><ol start="3">
<li>
Balance Sheet – Rupa is a low debt company with D/E ratio of 0.2xs as on 31st Mar 2018. 
</li>
<li>
Management - Rupa was founded by brothers Prahalad Rai Agarwala, Mr. G.P. Agarwala and Kunj Bihari Agarwala in 1985. They hold positions of Chairman, Vice Chairman, and Managing director respectively. The latest promoter shareholding is 73.3%.</li>
<li>Fair Value -</li>
</ol><table class="table table-striped"><tbody>
<tr>
<td>Rupa</td>
<td>FY18</td>
<td>FY19E</td>
<td>FY20E</td>
<td>CaGR</td>
</tr>
<tr>
<td>EPS</td>
<td>10.8</td>
<td>12.96</td>
<td>15.552</td>
<td>20%</td>
</tr>
<tr>
<td>PE</td>
<td>           33.98</td>
<td>                28.32</td>
<td>           23.60</td>
<td> </td>
</tr>
<tr>
<td> </td>
<td>PE range</td>
<td>FV on FY20E</td>
<td> </td>
<td> </td>
</tr>
<tr>
<td> </td>
<td>25</td>
<td>                   389</td>
<td>6%</td>
<td> </td>
</tr>
<tr>
<td> </td>
<td>30</td>
<td>                   467</td>
<td>27%</td>
<td> </td>
</tr>
<tr>
<td> </td>
<td>35</td>
<td>                   544</td>
<td>48%</td>
<td> </td>
</tr>
</tbody></table>

Rupa and Company Ltd (Rupa) incorporated in 1985, has established a strong brand recall by offering bouquet of brands under umbrella brand 'Rupa' in the economy, mid-premium and premium segments. The company follows efficient business strategy by outsourcing low end and labour intensive work.Rupa is strengthening its position in super premium segment by licensing of foreign brands such as ‘FCUK’ and ‘Fruit of the loom’.After establishing strong foothold in men's innerwear segment, Rupa is looking at strengthening its female innerwear business in future and is open to grow this segment through inorganic route in domestic market.We believe that Rupa being a leading brand in Indian innerwear market would be one of the major beneficiaries of GST and has potential to grab market share from unorganized space which is 50% of the total market. Operating &amp; Financial Summary - 
Business - The Indian innerwear market is shifting from a price sensitive market to a fashion quotient market. Subsequently, Rupa has gradually shifted from mass segment products to the premium segment with strategic tie-ups with various foreign brands. Rupa has been constantly focusing on foraying into premium brands to enhance its operating margins. In addition to existing licensed brand of FCUK, Rupa recently entered into a license agreement with Fruit of the Loom Inc (FOTL), a unit of Berkshire Hathaway, to manufacture, distribute and sell innerwear and outerwear products under their brand name. The price points for the brand would be in the range of Rs.150-400 per piece and would be positioned as a ‘value premium’ brand. We believe premiumisation of brands will improve margin profile, since premium brands command higher margin than mass segment products (~ 5% higher). 

Earnings – Over the 5-yr period FY13-18, Rupa has delivered CaGR growth of ~7%, 5%, 6% in Revenues, EBITDA &amp; PAT respectively. 


Balance Sheet – Rupa is a low debt company with D/E ratio of 0.2xs as on 31st Mar 2018. 


Management - Rupa was founded by brothers Prahalad Rai Agarwala, Mr. G.P. Agarwala and Kunj Bihari Agarwala in 1985. They hold positions of Chairman, Vice Chairman, and Managing director respectively. The latest promoter shareholding is 73.3%.
Fair Value -


Rupa
FY18
FY19E
FY20E
CaGR


EPS
10.8
12.96
15.552
20%


PE
           33.98
                28.32
           23.60
 


 
PE range
FV on FY20E
 
 


 
25
                   389
6%
 


 
30
                   467
27%
 


 
35
                   544
48%
 



Rupa In-Line Q1-FY19, Attractive Ind Outlook, Strong Earnings Potl. From Mix Premtn, Driving Margins

Rupa & Company

Rupa In-Line Q1-FY19, Attractive Ind Outlook, Strong Earnings Potl. From Mix Premtn, Driving Margins