Credo Brands Marketing

Stock Opportunities
1

Hi Guys ,
At current market price 195, mufti lis trading at a multiple of 16
Credo brands mufti came to ipo on 28th December , with issue price of 280. It was oversubscribed with lot of interest from institutional investors. With market conditions it is beaten down to 200 levels, which makes to think about market behaviour
Even in 9Mfy24, their PAT margins are at 12 % and at cmp 224.5 its trading at a pe of 17.

Looking at the chart this looks oversold

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The revenue this year , had grown at 19 percent and due to more advertising spend , Pat was down 7 percent.

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Fundamentally looking very solid. Also Its peer cantabil retail still quoting at a pe of 31. Company guided for growing at 20 percent yoy . What Am i missing here?

As per management this year expecting revenue of 600 cr and ebitda around 30 percent. Next year growth around 20 percent. They have increased advertising spend in q3 which led to reduction in ebitda
Also since free float is just 15 percent , this took lot of beating . So volatility is expected. No reco, take your call

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The Street seems unenthused by Management’s lack of clear roadmap to the 18% growth guidance. Valuations look more reasonable now.

Dis: Holding 2% of PF

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Even then , this falling almost 40 percent from top seems a bit extreme

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I haven’t analysed in detail. But here are my thoughts:

Credo Brands reported doubling of sales in 2023 as compared to 2021. What caused this sudden spike in sales and OPM to zoom to 30+ from 18-20 percent?

If I am being totally conservative and assign pre 2021 OPM of 20 percent on sales of 500 crore, PBT will be around 50-60 crores and PAT to be 40-45 crores based on 25 percent tax. Total number of outstanding shares are 6.5 crores. That gives us an EPS of 6-7 and P/E of about 30 on CMP. Things to ponder:

  1. Why did the sales double in just two years of time? Has management given us a concrete reason?
  2. Will they be able to maintain this rate? I think market is not sure about this and that’s why the price is down 40 percent from listing.
  3. Based on CMP of 200-210, it appears it is priced to perfection.

Disc - No holding.

Thanks,
Varun

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5

Hi Varun,
Please see, sales has not doubled in two years. Even in 2020 sales were 450cr

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Also company is confident of margin to be at 28 to 30 percent range . the reason being

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Thank you. My bad, I stand corrected on sales part.
But employee and other costs have reduced drastically in last 2 years which contributed to the spike in OPM and bottom line. They are planning on expanding their stores though EBOs which will increase the costs and depreciation as well.

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Thats okay . Still even if they maintain some 25 percent ebitda with good growth , that will be great and seems very very reasonable at cmp

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