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Archies Ltd. – Time to say ‘cheese’ - Microsec Ltd..pdf · 08 September 2014 Microsec Research Analyst: [email protected] We rate Archies Ltd a ‘BUY’.A renowned and

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Page 1: Archies Ltd. – Time to say ‘cheese’ - Microsec Ltd..pdf · 08 September 2014 Microsec Research Analyst: amukherjee@microsec.in We rate Archies Ltd a ‘BUY’.A renowned and

Microsec Research08 September 2014

Analyst: [email protected]

We rate Archies Ltd a ‘BUY’. A renowned and leading company in the SocialExpressions Industry is all set to grow with its revamped business model with itsstrategy of going online. Our rating underpins the company’s focus on the newmodel with core brand strategies in place.

Investment Highlights

The company is the leader in the Social Expression Industry: The socialExpressions Industry is still unorganized in India. There are very few seriousplayers having nationwide presence. The Company, which pioneered theconcept in Indian market, is the leader with more than 50% share of theorganized sector. Company continues to increase its Pan-India footprint.Presently It has 240 owned and operated retail outlets has plan to open more 90stores in phase manner over a period of next 3 years.Strong brand with inexpensive valuation: Archies is a strong brand with superconnects between generations through its social expression products. TheMarket Cap to sales of the company is just ~0.30 only which is way below forleading brands. The company has reasonable financial strength and is aconsistent dividend paying company.Strong growth visibility in online shopping: Over the last few years companyhad made significant work in online shopping at www.archiesonline.com. Tomake the shopping comfortable & satisfactory the number & variety of products iscontinuous growing. The company has started servicing a few selective cities,would cover all the cities in India by entering into tie-ups local courier serviceprovider.Overseas market opportunity. Overseas markets offer vast opportunity.Presently company is exporting its products to Sri Lanka, Bangladesh, UAE, UK,Mauritius, Kuwait, Egypt, Kenya Uganda, Zambia, Russia, Botswana, Oman,Rwanda, Libya and Ethiopia. The Company has plans to take active participationin exhibitions and fairs to reach new markets and thus enhancing sales.Company is likely to bounce back in sales of traditional products. Sales ofthe traditional Greetings card of the company is likely to bounce back due tolarger base of young population in India and also due to awareness on mediapenetration in new areas and also due to increased social connect between theyoung, the middle aged and the old.

Archies Ltd. – Time to say ‘cheese’BUY Sector – Gift Articles, Toys & Cards

Analyst: Ajoy Mukherjee

Email ID: [email protected]

Promoterand

PromoterGroup

61.74%

DII0.38%

NonInstitutions

37.88%

FII0.01%

Shareholding

BSE Code 532212NSE Code ARCHIESBloomberg Ticker AGG INReuters Ticker ARGG.BOFace Value (INR) 2.00Equity Share Capital (In INR Crs) 6.76Average P/E NABeta vs Sensex 1.00Average Daily Volume 2,24,628Dividend Yield 2.0%PEG Ratio NA

STOCK SCAN

99.00109.00119.00129.00139.00149.00159.00169.00179.00

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CLOSE(Archies Ltd) CLOSE(SENSEX)

Current Market Price (INR) 21.55Target Price 37.00Upside (%) 71.7%52 Week High / Low (INR) 24.20/13.15Market Capitalization (In INR Crs) 72.80

MARKET DATA

Particulars FY2012A FY2013A FY2014A FY2015E FY2016E

Net Sales 201.13 201.28 196.01 211.70 243.45

Growth (%) 6.88% 0.07% -2.62% 8.00% 15.00%

EBITDA 22.27 17.63 15.58 17.46 20.81

EBITDA Margins (%) 11.07% 8.76% 7.95% 8.25% 8.55%

Net Profit 9.50 7.01 5.24 5.82 8.30

Net Profit Margins (%) 4.72% 3.48% 2.67% 2.75% 3.41%

Net Profit Growth (%) -12.28% -26.21% -25.25% 11.07% 42.61%

EPS 2.81 2.07 1.55 1.72 2.46

BVPS 31.20 32.77 33.78 35.53 37.99

P/E 8.37 7.13 13.90 12.51 8.77

P/BV 0.75 0.45 0.64 0.61 0.57

RoE 9.37% 6.49% 4.66% 4.97% 6.68%

EV/EBITDA 3.87 2.95 4.61 4.40 3.69

Source: Company Data, Ace Equity, Microsec Research

Archies Limited Financial Performance (In crores except per share data & %)

Page 2: Archies Ltd. – Time to say ‘cheese’ - Microsec Ltd..pdf · 08 September 2014 Microsec Research Analyst: amukherjee@microsec.in We rate Archies Ltd a ‘BUY’.A renowned and

Microsec Research08 September 2014

Analyst: [email protected]

Brand Associations

Valuation

We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E EPS ofINR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for the stock, whichrepresents an upside of 71.70%, one year basis, from the current market price of INR21.55.

Risks & Concerns

Rent is one of the largest components in retail business. The rentals for premium locations aresignificantly on an upward trend so it is affecting the bottom line of the company

Fluctuation in foreign currency rates adversely affects company’s cost of raw materials.

Technology in the form of SMS and e-greeting had its toll on the growth of the greeting cardbusiness.

Microsec Research08 September 2014

Analyst: [email protected]

Brand Associations

Valuation

We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E EPS ofINR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for the stock, whichrepresents an upside of 71.70%, one year basis, from the current market price of INR21.55.

Risks & Concerns

Rent is one of the largest components in retail business. The rentals for premium locations aresignificantly on an upward trend so it is affecting the bottom line of the company

Fluctuation in foreign currency rates adversely affects company’s cost of raw materials.

Technology in the form of SMS and e-greeting had its toll on the growth of the greeting cardbusiness.

Microsec Research08 September 2014

Analyst: [email protected]

Brand Associations

Valuation

We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E EPS ofINR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for the stock, whichrepresents an upside of 71.70%, one year basis, from the current market price of INR21.55.

Risks & Concerns

Rent is one of the largest components in retail business. The rentals for premium locations aresignificantly on an upward trend so it is affecting the bottom line of the company

Fluctuation in foreign currency rates adversely affects company’s cost of raw materials.

Technology in the form of SMS and e-greeting had its toll on the growth of the greeting cardbusiness.

Page 3: Archies Ltd. – Time to say ‘cheese’ - Microsec Ltd..pdf · 08 September 2014 Microsec Research Analyst: amukherjee@microsec.in We rate Archies Ltd a ‘BUY’.A renowned and

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Come, strike the right balance through Benchmarking Research.

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Benchmarking Fundamental Research

Microsec Research Nifty CNX Midcap

stAs on 31 July 2014

An amount of ̀ 1,00,000 invested individually in all 293 stocks ie, ̀ 2,93,00,000 investment as and

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basis Nifty has given a return of 13 percent and CNXMID CAP has given a return of 15.2 percent.

Page 4: Archies Ltd. – Time to say ‘cheese’ - Microsec Ltd..pdf · 08 September 2014 Microsec Research Analyst: amukherjee@microsec.in We rate Archies Ltd a ‘BUY’.A renowned and

Microsec Research08 September 2014

Analyst: [email protected]

The investments discussed or recommended in this report may not be suitable for all investors. Investors should use this research asone input into formulating an investment opinion. Additional inputs should include, but are not limited to, the review of other. This is notan offer (or solicitation of an offer) to buy/sell the securities/instruments mentioned or an official confirmation. Microsec Capital Limitedis not responsible for any error or inaccuracy or for any losses suffered on account of information contained in this report. This reportdoes not purport to be offer for purchase and sale of share/ units. We and our affiliates, officers, directors, and employees, includingpersons involved in the preparation or issuance of this material may: (a) from time to time, have long or short positions in, and buy orsell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities andearn brokerage or other compensation discussed herein or act as advisor or lender I borrower to such company (ies) or have otherpotential conflict of interest with respect to any recommendation and related information and opinions. The same persons may haveacted upon the information contained here. No part of this material may be duplicated in any form and/or redistributed without MicrosecCapital Limited’ prior written consent.

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