Lovable lingerie - poor man's Page industries

Lovable Lingerie Limited is a leader in women inner ware market with its well-known brands Lovable and Daisy Dee. Like page has shown a CAGR of > 25% for last 5 years. It has all the hallmarks of a consumer business. Rising margins, low working capital and high return ratios. We are all aware of the consumer centric theme being played here as well as like of Page Ind.

http://www.lovableindia.in/

This came across on my radar after the recent fall of 25% which made it interesting.

This is a high RoE business the returns look depressed because of the cash of approx. 100 crores lying on the balance sheet.

If one excludes this cash the RoE jumps to 30%+. This business can survive on low capital it is just the mentality of hording cash which has brought the RoEs low. Last few quarter has seen a rise in working capital as the company has been adding new distributors and now its products reach around 10K distributors.

The stock could rerate if company comes out with a high dividend payout policy like Page industry.

Some brokers are predicting an EPS of around 16 for FY13 and 19 for FY14. On a price of 297 it is quoting at a P/E of 19 FY13 and 16 times FY14 numbers a substantial discount to Page Industries.

Certainly it does not deserve a P/E at levels of Page unless it also starts distributing the surplus it generates.

Here are a few broker reports to give you the latest update

http://breport.myiris.com/ARSL/LOVLINGE_20130214.pdf

http://corporateadvisor.co.in/yahoo_site_admin/assets/docs/IndianInnerwearSector_InitiatingCoverage.139165358.pdf

rupa & Co for some timepass

http://content.icicidirect.com/mailimages/IDirect_RupaCo_Q3FY13.pdf

Numbers from Screener.in

Narration

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Trailing

Best Case

Worst Case

Sales

30.66

41.54

60.06

69.24

86.96

104.04

132.99

149.78

170.00

169.39

Expenses

25.54

36.02

52.72

60.73

70.45

84.27

109.91

126.03

138.85

142.53

Operating Profit

5.12

5.52

7.34

8.51

16.51

19.77

23.08

23.75

31.15

26.86

Other Income

0.05

0.04

0.12

0.11

0.03

0.08

6.73

7.98

-

-

EBIDT

5.17

5.56

7.46

8.62

16.54

19.85

29.81

31.73

31.15

26.86

Depreciation

0.17

0.21

0.28

0.39

1.31

1.37

1.50

1.77

1.77

1.77

EBIT

5.00

5.35

7.18

8.23

15.23

18.48

28.31

29.96

29.38

25.09

Interest

0.55

0.25

0.64

1.37

1.23

0.78

0.59

0.94

0.94

0.94

Profit before tax

4.45

5.09

6.54

6.87

13.94

17.65

27.71

29.02

28.44

24.15

Tax

1.53

1.79

2.38

0.85

3.46

4.38

6.10

6.64

23%

23%

Net profit

2.89

3.18

4.16

2.87

10.81

14.12

21.65

22.38

21.93

18.62

EPS

13.32

13.05

11.09

Price to earning

-

-

-

-

-

29.17

30.80

22.32

27.43

22.32

Price

297.35

358.08

247.45

Narration

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Equity Share Capital

0.50

0.50

1.50

1.50

7.50

16.80

16.80

Reserves

5.47

6.56

10.49

13.18

16.86

124.43

142.17

Secured Loans

4.52

3.28

5.54

3.71

0.29

-

3.44

Unsecured Loans

-

3.00

1.50

2.68

0.04

-

-

Total

10.99

13.84

19.03

21.07

24.69

141.23

162.41

Net Block

2.69

3.13

3.58

13.19

12.79

12.94

23.44

Capital Work in Progress

-

-

-

-

-

-

3.78

Investments

-

-

1.00

1.00

1.98

93.06

96.12

Working Capital

8.30

10.71

14.44

6.88

9.92

35.23

39.07

Total

10.99

13.84

19.03

21.07

24.69

141.23

162.41

Debtors

-

-

6.09

8.71

13.64

10.58

15.47

Inventory

-

-

16.61

13.53

13.07

22.36

33.61


Sales/PAT growth-CAGR is pretty good, dividend is miserly, but is not frequent equity dilution a cause of concern ??

the women’s innerwear domain which is the main business area of lovable is going to be poached by page inds. Plus there are other non listed entities which are also trying to fight it out for market share.

Still it would be interesting to keep lovable on watchlist. Biggest trigger as you say should be div payouts.

Loveable probably has maternity and post maternity inner wears which Page should look forward to.

~Supratik

Hitesh bhai

Lovable operates in the mid category where as page as always would be targeting the premium category also the market is big enough to accommodate a number of players

What’s wrong with this name? now down to 270 levels

I think some stocks which have not met investor/market expectations are experiencing PE CONTRACTION.

e.g titan, lovable

Now at 240 hard to believe lovable behaving like an operator stock

Seems like sales, margins have been tapering down over last 2 yrs. So far 9 month sales up 11%, operating profit up just 4 %. Sales have been up & down across qtrs. Is there a lot of seasonality in this lingerie business? Pages Industries qtrs are relatively all a bit similar. I think Hitesh is right about PE contraction here(can easily slip from 18x now to 15x in a hurry in weak mkts).

In the earnings call they had indicated that last qtr they didn’t send to a few dealers as payments had not been received.

Interestingly Rupa which has had a flat stock price for quiet some time has seen some move. They also reported good results and increase in margins last quarter.

Latest on lovable from Anand Rathi

http://breport.myiris.com/ARSL/LOVLINGE_20130307.pdf

Hi Hitesh & Senior member,

What looks here, Now they have started paying dividend also payed 150 % this year.

And market is huge for more players & can accomodate more player ( 50 crore + woman population). In pack of Page, Kitex , lovable. 2 has run quite ahead, What’s yours views on laggard?

(Valuation & Market cap is low compare other). Even I think brandwise of lovable is more heard than kitex. Slowly people are moving to brand name.Some fund page industry (Nalanda funds) has also invested in it.

Your views are invited.

Dis:- My views may be bias, invested small part <2 % for tracking.

thnx

Hi All,

Anybody noticed this yet?

http://www.thehindubusinessline.com/markets/lovable-lingerie-shares-vault-on-tie-up-with-adidas-group-co/article6583145.ece

Are they trying to follow into footsteps of Page Industries?

Find the reference to 1+2 years very puzzling. What does it mean really ?

“It had acquired licence of its brand for 1+2 years to produce, distribute and sell the products in the Indian market which would help expand its market operations by capitalising on the brand (value) and also enhance its reputation.”

Recently the Management in an interview has given clarifications on some of the issues:

  1. The margins are to be in the range of 15% in the next few quarters.
  2. Production from the tie up with Adidas will start coming into the market from Dec 2015 onwards.
  3. The company has maintained its market rate of 20% in the premium lovable brand.
  4. They do not see online retail as a threat but as an opportunity to expand the distribution of their products.

This is basically a consumption story…as the economy grows and as disposable incomes rise, more and more women will go for branded lingerie. The progress of this company cannot be monitored on a quarter to quarter basis except to use any price fall to add more to the portfolio. This is a long gestation stock and requires quite some time to bloom …but the returns for the patient investors can be quite huge.

A better way of monitoring the progress would be with the help of long term charts - Monthly and weekly. And on both this charts the stock is showing clear signs of bottom formation and turnaround.

For making purchase the two trend lines ( dealing with earlier lows and the present low points) present a very good entry guidelines for those making their first purchase in Lovabe Lingerie…

Those making the purchase according to these trendlines can take huge comfort from the fact that they are purchasing a company with immense potential, one in which reputed value investors hold a good quantity at a much higher price ,at a very good price and at a time when the bottom formation process appears to be over and the risk reward ratio favours investors.

A good company with very good fundamentals and at a technically very good price…Highly recommended even in this turbulent market.

It has gone nowhere during the last many yrs and why would somebody be interested in it? for a bounce?? there could be better stories even for a bounce.

Perhaps I have not been as clear in my post as I had hoped to be.

I am not talking about a bounce. I am talking about a bottom formation and a sustained uptrend which would follow. This uptrend will be backed by both fundamentals (improving sales, margins, and Adidas ) as well as technical.

Don’t buy it for a bounce, but consider buying it for long term holding in your portfolio. And buy it precisely because it has gone nowhere in the past so many years and …because it may go up a lot in the coming years.

I rest my case; the decision is yours. Pl do as you deem fit and proper.

I think this story was over at least for minority investors even before it started. Do some google search to find out how maxwell and lovable promoters are related. While they milked maxwell, lovable was a newborn baby to start milking again. I consider it an inferior story for a longer term play compared to playing for a bounce. Page is growing aggressively in women’s segments and gaining market share while this one is happy in just maintaining it. Now they want to take license route which is a classic sign of failure as they had own brands. This will be flashed repeatedly in the media as long as PE guys are invested and will be buried or get bought at some point of time.

2 Likes

Has someone met management recently? can someone update on the notes from AGM?