SUPERHOUSE LTD is it under valued

F
Superhouse Ltd is the flagship company of superhouse group which is one of the largest exporters of finished leather from India. Company is supplying products to major global brands like Tuff Tusker,Heckle,
Bulwark,Stabilus ,Secura ,Hauf ,HKS ,Globex, and EWS .
Apart from this company is selling its two
brands in India ‘Allen Cooper ‘ and‘Double Duty’ through company owned Allen Cooper shops. Company have six
subsidiaries - M/s Superhouse (UK) Limited,
M/s Superhouse (USA) International Inc,
M/s Superhouse Middle East FZC,
M/s Superhouse R.O. S.R.L.,Super House
HK Limited ,M/s Superhouse R.O. S.R.L.
and Super House Canada Inc.Superhouse group
having 15 manufacturing units across India.
Superhouse is the second largest exporter of Leather footwear and other leather products from India .Its products are exporting to countries like France, UK, Germany, USA, Canada, Spain, Scandinavia, Netherlands …etc under its own brand “ Allen Cooper” and supplying to various companies like Topman,Barrats,Next,Ikon,Bata, Hush Puppies ,Pierre Cardin,C&A,Eram,Andre, Dorothy Perkins, Nilson Group, Acebo’s…etc.In the safety shoe segment company exporting products under own brand “Double Duty” to Gulf countries and European countries.More than 80% of company’s turnover is presently from export and only now company seriously exploring the opportunities in domestic market with their “Allen Cooper “ brand. Super house group having 15 manufacturing facilities in India and marketing offices in UK, U.S.A., U.A.E. Canada,and Romania…etc . The company is also in textile segment like jackets and recently entered garments and has a garment manufacturing unit. The promoter mr Mulktar Amin has a vast experience in this field and promoter holding is 54%.
Company reported a top line of Rs.700 cr and a net profit of Rs.32 Cr in last financial year. Company reported half yearly rev of 302 cr and net profit of 13 cr for fy 16 Company reported an EPS of Rs.30 in fy 15 and ther half yr eps at 11 for fy 16 . The net block around 180 cr and general reserve at 220 cr and debt of 150 cr cash flow from operations for fy 15 44 cr .
Considering promoters experience,continuous growth in business, export opportunities, garment segment and comparative peer valuations can senior members enlighten why it is trading at around 11 PE and less than 2 PBV

Stock was listed only in BSE earlier and now it is listed in NSE also

Discl not invested as of now

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Hi,

I was also looking at this company today post the rise. Was looking in comparison to peers like Mirza, Liberty and Bata.

I took the data from Moneycontrol and compared it. Its ROCE, NPM and Sales change % YoY are weaker compared to the peers and also has a higher debt burden which is due to its acquisitions in UK in the past few years,

It has a good PAT and steady business, can improve margins once the debt is repaid which the company estimated will take 4-5 years.

You can look at it and it looks a good bet with its diversified operations. I am also looking at it, will take a tracking position at lower levels if it permits me to enter. Mirza Intl looks good as well.

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this is about the ready made garment segment i just copy pasted from there website and the segment wise breakup shows textile division revenue as 120 cr and profit around 10 cr for previous year anybody has any idea whether they have showroom anywhere in india

readymade Garments - Manufacturing Facilities

Brief
We are well-known manufacturer and exporter of woven and knitted garments including hi-fashion garments. A state-o- the-art infrastructure and stringent quality control right from procurement of raw material to designing, stitching and finishing, ensure international standards of quality— a hallmark of our Readymade Garments Division. This coupled with a philosophy that aims at customer satisfaction and delight has enabled Superhouse to create a niche in the diverse and sophisticated garment market.

Products
Ladies Tops, Tunics, Evening Dresses, Trousers and Jackets.

Quality Standards
ISO 9001-2000 Unit with Certification from CEN 345 & DIN 4843.

Capacity
300000 Pieces Fashion Garments per annum

Exports
We export to the following nations:
Germany
Denmark
UK
USA
Holland
Infrastructure
30,000 sq. ft. area with 170 Japanese lock stitch machines and 33 Japanese special operation machines. The readymade garments units located at:

Readymade Garments Division
A-14, Sector-65, Phase III Noida - 201303 U.P. INDIA

Manpower
We have 500 experience workers who are supervised and managed by highly skilled and qualified professional managers.

The Company has received award of largest exporter in the country for the 5th consecutive year. This for the first time in the history of leather industry that any company has continuously bagged this award for 5th year in a row.
1st February 2013
Superhouse Acquires Spanish Footwear Company – Linea De Seguridad
1st December 2012

From the website:

we are approved vendors for global brands such as Wal-Mart, Filanto, Auchan, Andre, Shoe Fayre, Hudson Bay, Heckel Securite, Secura and many more. In the last decade the group spread its wings in the field of Education, Real Estate and Retail.

All these are big names in countries like France, USA, Italy, UK etc.
Diworsification may be a case for not being valued on par with peers. Annual reports not available 2012 onwards. The quarterly reports not available either. There is no investor presentation also.

Comparing Superhouse to Liberty or Mirza will not be right because both Red Tape and Liberty are well known brands. If I remember correctly Salman Khan was endorsing Red Tape few years back.

When it comes to brand of Allen Cooper, forget top of mind recall even aided recall will be difficult to achieve when it comes to consumers. Considering that it is a B2B brand which is now trying to become B2C as well domestically, I think it has not yet been able to achieve that successfully.

Considering that the company is in to so many different areas like real estate and education etc, the breakup for shoes is not available. Maybe the financials do not allow money to be spent on brand building currently or if done is likely to take a toll on financials. Maybe the company plans to reach a certain level of profitability/turnover when it feels that brand building is warranted.

More than 80% turnover is from exports so balance 20% comes from the domestic market for allen cooper as well as the other business of real estate, education etc.

It is available for sale on websites like Flipkart, Snapdeal, Paytm etc but unless you compete on price or brand, the numbers are not going to be very impressive.

Again copying from the website:

The list includes brands like ‘DKNY’, ‘Liz’, ‘Claiborne’, ‘Ralph
Lauren’, ‘Gap Inc.’, ‘The Limited Brands’, and ‘The G-III Apparel
Group’. In Europe, our customers include Esprit, Paul Smith, Karen
Millen, River Island Stores, etc.

This is for the Fashion wear garments segment. They have a decent client list. Similar sort of list is for Leather wear as well.

One of the negatives atleast for Europe and USA is that there is lot of animal right activism from groups like PETA and against using leather products. They advocate using faux leather even for products like handbags, belts etc. So the company may find it difficult to grow sales reasonably due to this.

Another negative is that all manufacturing facilities are based in and around North India. Any natural calamity like the Chennai Floods is likely to be a big disruptor as the company cannot manage to stop fall in production by supply from other locations if its production was geographically distributed evenly.

The dividend payment is okayish. There are no details given on the board of directors. So tough to make a call in the absence of the annual reports.

It is a company that has stayed off the media and investors radar and rightly so because no efforts are being made to market themselves to investors or consumers.

Their website for selling Allen cooper shoes directly is also buggy and has a big signup form. There is no option to sign in using Facebook or Google+. There is very little incentive for customer to sign up and buy from here.

I would avoid the company. Even if it looks cheap, the disclosures are not good and until we see management ready to explain the brand building process and marketing domestically and internationally, there will be no clarity and we would be taking a shot in the dark.

Disclosure: not invested.

Nelson I think you have seen the group website no super house ltd is separated demerged entity website is only super house.in only the group is involved in education and real estate
Super house has been giving annual reports regularly refer BSE all the annual reports are available
And also as to the brand ALLEN COOPER I have seen this even in UK it has better name in formal wear segment than redtape as to Mirza there was earlier corporate governance issue regarding the 400 cr BG to some companies as regards the promoter of Liberty everybody knows how ethical he is and he has had so many legal problems earlier
I have been tracking this company for the last three years and mr Muktar Amin is a very decent person with huge experience a in leather field and allencooper education and Delhi public school
Even I don’t know why the market is hesitant to rerate the stock as to chennai floods don’t worry it has no big impact on any of the companies units
I have been trying to meet the management if I get a chance I will post it but with my experience i can tell you that management ethic wise this is a far better than Mirza and Liberty
As regards why the market is hesitant we have to find out but refer the bse site for the annual report quarterly report even there website I think the link is given above kindly do please verify before posting thank u
Disl holding a tracking quantity

Apologies for seeing the wrong website and commenting. Want to know from you what makes you bullish. Revenue for both Leather and leather products as well as textiles is down YOY as of 30/9/2015. PBT is also down nearly 33%.

You misunderstood my comment about the Chennai Floods impact. The thing is all its production facilities are located in the north and while that may be helpful logistically an event like a big earthquake or a situation like Chennai Floods can cause problems in production.

As with regards to Mirza and Liberty, I was talking about the brand per se and not the management quality or integrity.

Also Superhouse has lot of marquee names that they supply to. Someone like a Walmart has huge budgets for sourcing its products for selling in its stores and if they make headway with even few of these names, the revenue could easily go up 25 to 30%. Also these relationships and contracts could become longer term in nature and ensure stability as well.

Appreciate your post on this. As regards undervaluation, probably we would have to dig deeper for it.

Nelson no apologies needed please thanks for the feed back I never mentioned I am bullish about this I clearly mentioned I have tracking it for the last 3 years and they are not able to improve there OPM
Once I even attended the AGM in 2014 I was very impressed by the quality of the management but that time mr.muktar Amin was not present I understand he is very respected person with high integrity in this field but no interaction

when I was in UK I saw the formal shoes under ALLEN COOPER brand has a good brand value and the local guy was aware about super house he was one who mentioned about there equestrian products of super house has also got good brand value and later back in India in Bangalore or Hyderabad ( I forgot) I saw there ready made garments and shoes and leather jacket showroom that time I missed to enquire
Now I understand they have incurred additional debt for creating own show room and there was a Spanish acquisition and there double duty shoes is very popular in industrial safety segment even in India
Once they even tried to get into defence order for milatry boots but I not fully aware what happened to that as far as the the revenue and profit scalability I am still not able to pinpoint why it slacking if in the coming years they are able increase there opm by 2% to 3% that can show better profit than Mirza and Liberty
For me quality of management is primary importance to even track a stock and generally I don’t post anything I till I tracked for minimum 2/3 years
Please once again I would like to state that neither I am bullish nor I am bearish I am a pure long term investor my age has thought me that quality with growth only will survive on long run which is what I am trying to ascertain in this case
Once agin thank u please do share any addl info regards

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i found there sales website very interesting kindly go thru this

http://www.allencooperindia.com/
they have men shoe women shoe accesories garments leather bag store detailsrands We Deal In

Brands We Deal In
Until now, Allen Cooper had been enjoying the prestigious patronage of British and European markets. The brand has now stepped into the Indian market and is catering to the requirements of corporate and institutional customers, creating a niche image for its fashion leather products adhering to the high standards that the British have set, Allen Cooper’s range of products boasts of an array of international designs through its Italy, UK, China and India based design studios.However, Allen Cooper has not rested on its laurels. It is acquiring the best of Indian patterns and is continuously innovating products with imagination and realism, leaving competition miles behind. Indian customers have taken very well to Allen Cooper products and the demand is growing daily among quality conscious customers demanding international class. The response has been overwhelming and Allen Cooper will soon be spreading its wings across India to cater to Customer’s Wishes.Double Duty is a brand owned by Superhouse Ltd for marketing safety footwear and garments mainly to Gulf countries and European countries. Double duty is the only brand in export market under which we produce safety shoes with Direct Injection PU, PU/TPU, Goodyear welted and Direct vulcanizing process meeting to all international safety norms.
Contact this Supplier Now!

This stock recommended very early even by Amit Arora also

Amit AroraNovember 18, 2013 at 9:53 PM
Superhouse Ltd is an export focussed company. If intending to buy a B) grade stock choose it over Relaxo. Likely to outperform latter. Disc: Not invested in either.

Reply

They are associated with such big brands deny Ralph Lauren
Why why why still this not valued or undervalued may we we miss something

Fashion Wear
The fashion garments industry has seen huge demands on both design and quality. Our manufacturing expertise, innovative design and rigorous quality control allows us to produce leather and suede garments that are as affordable and fashionable. We constantly change our designs keeping in mind the latest global trends and styles, and as per the demands of our customers.
Based in Noida, our unit manufactures for reputed international labels in USA. The list includes brands like ‘DKNY’, ‘Liz’, ‘Claiborne’, ‘Ralph Lauren’, ‘Gap Inc.’, ‘The Limited Brands’, and ‘The G-III Apparel Group’. In Europe, our customers include Esprit, Paul Smith, Karen Millen, River Island Stores, etc. All leathers for leather garments are provided by our own tanneries.

We produce a vast range of products for men, women and children, which includes T-shirts, tops, skirts, trousers, jackets and other trendy innovations.

Capacity: 6,000 garments per day

Does anybody have any idea about any joint venture announcement pending for SUPERHOUSE with a local major manufacturer aim given to understand they are to announce some sort of local tie up.
Also any idea about the milatry boot order

this is the article in business outlook

Vishal Koul
"If you deliver good quality products to your customers, they won’t bother trying new brands" —Mukhtarul Amin, founder, Superhouse
His grandfather made handcrafted saddles for the cavalry regiment of the Scindia army in Gwalior. His father entered the finished leather business and started Super Tannery Ltd in Kanpur in the early 1950s. But when Mukhtarul Amin decided to set up a business on his own in 1985, he wasn’t sure what line to get into. Playing it safe, he registered a company name that would fit just about anything — Superhouse. But the call of blood, perhaps, proved too strong. Amin, like his father and grandfather, also entered the leather goods business.
Thirty years later, as the 59-year-old leans back in his dark leather chair and gestures at the nine LED screens in a corner of his large office — each showing live scenes of a different shop floor — there’s no sign of that earlier, initial indecisiveness. Superhouse Ltd is now a ₹517-crore company that employs 3,000 people. The company makes shoes for brands such as Diesel, Mango, Zara, Top Shop, Next, United Colors of Benetton and many more and exports to over 80 countries around the world. “We want to cross revenues of ₹2,000 crore in the next three years. And the footwear business should grow to over ₹1,000 crore in the next four years,” Amin declares. How did he get here and how does he plan to get there?
Getting started
Based in Unnao, Uttar Pradesh, some 20-odd km from leather hub Kanpur, Superhouse now makes 20,000 pairs of shoes a day, of which 15,000 are exported (the company is present in the domestic market with the Allen Cooper brand of men’s footwear). It has two tanneries, with a combined capacity of processing 230,000 sq ft of leather every month. Other leather products include 75,000 garments every year for high-end brands such as Donna Karan, Ralph Lauren, Gap, Esprit and Paul Smith, among others, as well as accessories such as belts and wallets (about 600,000 pieces each every year). There’s also a ₹70-crore business in equestrian products, and the company claims to be the world leader in manufacturing breeches, riding boots and riding products (including chaps, rigs, halters, leads etc.)
It’s a far cry from when Amin started the company. “I didn’t know what to make, didn’t have the capital required or even a parcel of land,” he recalls. The first order was for manufacturing shoe uppers for a client in the UK. “They helped us technologically as well and gave us a huge headstart in the business,” he says. But lack of funds was holding back expansion and so, in 1986, Superhouse went in for a public issue and raised about ₹1 crore. Not a huge sum, but enough to set up its first tannery. The choice of location was easily decided — the Uttar Pradesh State Industrial Development Corporation offered land in Unnao at just ₹10 per sq m. The group now has 10 manufacturing facilities in the city, in addition to the tanneries, and seven more in Agra, Noida and Kanpur.
The big break came in the early 1990s, when Amin attended a fashion footwear fair in Birmingham. An importer there put him in touch with his buying agent in Mumbai and Superhouse got its first order for fully made-up shoes. “The initial days were difficult, thanks to middlemen and tight finances. But luckily, I always had the support of bankers. Also, we made sure we maintained a good range of products and delivered on time. This helped build goodwill,” says Amin.
Around the same time, the company also ventured into manufacturing safety footwear. It now produces injection-moulded safety shoes at four Desma plants, with a range that includes waterproof, non-metallic and combat footwear, as well as a special range of executive and ladies’ footwear. With a capacity of 1.2 million pairs a year, supplying to brands such as Hauf, Progressive Safety, Stabilus and Secura, safety boots bring in over ₹55 crore a year. “We are the largest exporter of safety shoes from India,” claims Amin.
Making the shoe fit
At first glance, the Superhouse men’s footwear assembly line doesn’t look like some of the world’s most popular shoe brands could originate here. It lacks the sparkling, many-labelled sophistication of multinational shop floors. The almost dimly-lit aisles are filled with workers — mostly men, all wearing sweaters, mufflers and caps — who brush against boxes and metal shelves that are scattered through the shop floor. There’s no sense of urgency or frenetic activity as workers cut, glue, fit, sew and shape leather in the mechanised line — even the assembly line winds its way across the floor at an unhurried pace. But look closely, and you see the shoe boxes bearing labels of big brands and workers slapping on price tags in pounds and euros on the deep blue suede dress shoes that are being finished.
It’s not easy working with big brands, concedes Amin. “They are very particular about social conditions. Some times, they even conduct unannounced audits at our factories,” he says. “But we don’t mind — as more global clients have come on board, we have become more and more compliant and careful.” While some of these conditions are pretty routine, such as paying salaries on time, not hiring children, providing benefits, not forcing overtime and ensuring workers are given proper training, leather footwear exports are also subject to industry-specific conditions, such as the needle-and-nail policy. Typically, such a policy requires that suppliers designate people to be responsible for issue of sharp objects such as needles, nails and tacks, and keep track of them. They are also responsible for tracking broken needles etc. — at many factories, the final product is even passed through an x-ray machine to ensure nothing’s been left inside the shoe.
saving grace for Superhouse, perhaps, is that larger, India-specific issues such as pollution of the Ganga due to tanneries and exploitation of contract labour haven’t been deal-breakers. “Tanneries have very poor PR — they get blamed unnecessarily. We were the first in the state to set up a water treatment plant,” Amin declares. While its tanneries have primary effluent treatment plants, in 1993, the group — with assistance from the UP government and the World Bank — helped set up a common effluent treatment plant, the first in the state. The larger question: will the steps Superhouse has taken towards compliance be enough to bring in more clients so it can reach its revenue target of ₹2,000 crore?
Growing in size
In the past five years, Superhouse has been growing at an average 11%. “We were present in many markets and since we have our own distribution companies in the US, UAE and Europe, which work exclusively on marketing and promoting our products, we were able to sail through the 2008-09 crisis,” says Amin. But competition is increasing as the shoe export market in India becomes more organised. Amin, however, doesn’t believe rising competition will hamper his company’s growth. “Buyers also don’t want to get into the hassle of trying out new suppliers every time. The only sure way of customer retention is to deliver quality products on time,” he says.
In fact, going forward, rather than the threat of losing customers to China, he sees a big shift from China to India. Amin points out that while markets in Europe aren’t doing too well, Germany, France and the UK are growing, and Indian factories are still getting good business. “Chinese labour is moving up the skill ladder and asking for higher wages. Also, the Chinese currency has appreciated, while the rupee has weakened, making India more attractive.” While that will help boost Superhouse’s revenue, Amin has a two-pronged strategy for future growth: overseas acquisitions and increasing capacity.
Over the past three years, Superhouse has spent ₹80 crore on three overseas acquisitions. In 2011, the company acquired British footwear trading firm Briggs Industrial Footwear, which distributes well-known brands such as Dr Marten, Caterpillar and Timberland. This is now being used to promote Superhouse products in the UK and Europe, especially as the company seeks to tilt more towards global brands rather than international retailers, since they offer better prices (currently, its exports are evenly divided between big brands and big retailers such as Walmart, Hudson’s Bay and Auchan).
The following year, in 2012, Superhouse took over a bankrupt Germany-based company. “We moved the machines back to India, retained the brand and sales people and started supplying shoes from here. We’ve turned the company around,” beams Amin. Now, he is shifting his attention to the other acquisition made in 2012, of Spanish safety footwear maker Linea de Seguridad — systems, processes and the supply chain are being more efficient, while production at the loss-making company has been slashed from 75,000 pairs a month to 20,000. Amin points to the strategic potential of having a brand and manufacturing facility in Europe, even if small and costly to run. “We can supply made-in-Europe shoes in the future. This will give us a lead over our rivals.”
Superhouse already has more than just a foot in the door when it comes to global footwear majors and retail chains. Whether its recent strategy of international acquisitions will prove the right fit for future growth, though, only time will tell.

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My 2 cents - I had done inventory audit on behalf of PNB around 12 years back when I was doing my CA articleship. The Comapny’s tanneries are based in Unnao and has a good work culture - most of the employees were working for last 20 - 30 years. Average age of permanent staff was around 15 years then !! They make shoes for many international brands and also supply to Indian army.

At that time share price was around Rs 12 - 14. Never knew it would jump to this level one day !! :slight_smile:

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savishresh did you find any red flags in the audit? Why are their returns so low?

Their inventory system was very tight - there were hardly any differences. Mostly they kept inventory equivalent to 1.5 to 3 months based on their movement.

For purpose of Returns and Margins, compare it with Mirza Internatonal which is a bigger and more known player. Mirza International’s inhouse brand - Red Tape is well known and you can find it in stores everywhere and even in Middle East. Super Leather House inhouse brand Allen Cooper failed miserably. A good inhouse brand commands much higher value and increases Company’s brand and reputation many folds. Say you manufacture a shoe for Rs 250 export it for Rs 350 - 375 (B2B model) but if you sell it through your own brand in the market (B2C model) you can get around Rs 600 which is much higher value.

Other thing is since majority of products are exported, what grade of goods are being produced. There are 10 grades of leather - 1 being the lowest and 10 being the highest value leather - margins are always higher as one moves up the value chain. So depending on what grade orders you get your margins would vary accordingly.

Other than that, I am not tracking this Company or Mirza International its closest and higher rated rival so really don’t know whats affecting its Returns specifically.

Promoters of Mirza international bought huge chunk of their own shares for Rs 18 in 2013. I should have bought its shares then but thought that its a family business with no regard for minority shareholders and skipped it. In 3 years share price jumped more than 6x !! Another learning for me - not to generalize business and ignore good opportunities.

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Though Mirza International’s margins are improving, their sale grew less than 1% YoY. Any idea why was this?