Stock views on Superhouse Ltd

 

 

 

This is a leather company based in Kanpur. This company is a leading exporter of leather and leather products from the country. This company has got 11 plants—all located in Uttar Pradesh. These plants are located in Unnao, which is very close to Kanpur. They have manufacturing operations in Kanpur, Agra and Noida. In all they have got 11 manufacturing plants making different products and besides these manufacturing plants, this company has got subsidiaries and overseas offices primarily for the purpose of sales of their products.

Now, the brands of the company are Allen Cooper and Double Duty. Allen Cooper has got good brand visibility also and it is used for the retailing of the company's products in the domestic market and also in select export markets. Double Duty is the company's brand for industrial safety shoes. Now if you look at the financials of the company, for FY10, this company reported sales of about Rs 355 crore, profit after tax was about Rs 13.5 crore. This company provided for a depreciation of close to Rs 18 crore which makes a cash profit of about Rs 21.5 crore. EPS on trailing 12 months basis is close to Rs 13.5. So at the current price of about Rs 56, this stock trades at a P/E multiple of just about 4.

So you have a stock where the cash profit is about Rs 21-22 crore and the marketcap is just about Rs 60-62 crore which means that the business is available at less than three years of cash flow. This company has been paying dividend on a consistent basis for the past few years. The latest dividend is about 12% and the most heartening fact is that the promoters for the past two years have been increasing their shareholding in the company.

The promoters holding has gone up from about 45% two years back to about 54%. So you have a company where the gross loss is about Rs 165 crore, sales are more than Rs 350 crore and the marketcap is just about Rs 62 crore. So at a P/E multiple of 4 and this kind of marketcap, the stock looks grossly undervalued.