Crew BOS Products Ltd - 78.00

Incorporated in 1988, Crew BOS Products Ltd (CBPL) designs and manufactures leather and leather-based fashion accessories and footwear. So its primarily engaged in exporting lifestyle fashion accessories & home decoration products made from fabrics, leather, metal, wood etc. Over the years, company has successfully transformed itself from being just a bags and belt manufacturer to a multi-product company. Today, its niche product profile can be broadly segmented into four divisions: fashion bags and wallets division, belts and footwear division, home goods division and the recently started - watch strap division. The fashion bag and wallet division is the largest, contributing more than 40% of revenue followed by belts and straps which accounts for 25%. The fashion footwear division, which started in 2003-04 is growing at a scorching pace and presently adds 20% to the top line. The balance comes from export of finished leather and from home good division. CBPL is constantly looking to broad base its product portfolio in order to keep itself abreast with the latest changes in fashion trends around the world. Recently, it has also entered into production of close shoe footwear. To summarize, company’s business model is based on catering to the outsourcing requirements of the leading international brands in U.S. and Europe.

Being an ISO 9001:2000 certified company, CBPL has six state-of-the-art manufacturing units including a world-class leather finishing unit located at Manesar (Haryana) equipped with hi-end Italian machineries and Italian leather processing technology. It also has a tannery at Jalandhar (Punjab) and is also fast developing an exclusive footwear manufacturing unit at the Mahindra SEZ in Chennai (Tamil Nadu). Notably, it has setup an outsourcing and marketing office in Hong Kong (China), marketing office in Milano (Italy) and a resourcing office in Cairo (Egypt). Company has to its credit the unique distinction of producing cost-effective, international-grade, Italian quality leather which has been very well appreciated in the foreign market. Its product range represents the international pulse of fashion as it supplies to some of the world’s best and most renowned international brands and retail chains such as Accessorize, Monsoon, Fossil, Marks & Spencer, Esprit, Next, GAP, Old Navy, Zara, Banana Republic, Tesco, H&M, Chico’s, Fat Face, Debenhams, J Jill, AEO, Armani to name just a few. To compliment this it has a highly scalable business model and there is tremendous scope for ramping up every individual client account. As CBPL derives 100% revenue thru export, it has formed a subsidiary called Crew Style Works to penetrate Indian market under its own brand name to encash the ongoing domestic retail boom. Company has already formulated strategic marketing plans and is all set to launch two brands ‘TEMPESTA’ and ‘CREW REPUBLICA’ initially by early 2008. It also intends to initiate a multi brand concept i.e. different brands for youth, executives, women, etc.

Being very optimistic on the footwear segment, CBPL has entered into a 51: 49 JV with Leather Crafts - a respected Chennai-based leather exporting house servicing the renowned American brand ‘Hush Puppies’, to manufacture and export all kinds of footwear and footwear components. Accordingly company has purchased 6 acres of land at Mahindra World City SEZ at Chennai where it is setting up a new plant to produce 10,000 pairs of full shoes per day. Part production from this new facility is likely to begin by December 2007 and to be fully operational by December 2008. At the same time, it is also looking to enhance its Manesar shoe unit capacity to 5,000 pairs of full shoes per day form 1800 pairs currently. Moreover for future growth company has acquired 30 acres of land at Neemrana in Rajasthan for the expansion of its capacities for fashion accessories and for the development of state-of-the-art manufacturing plant for closed shoe footwear.

To fund its expansion plan, CBPL is looking to raise 100 cr thru equity route in near future. Besides it has already allotted 12.50 lakh warrants, convertible into equity shares @ 178 Rs on preferential basis to the promoters / private business investors. Because of the continuous rupee appreciation, company’s share price has tumbled down sharply to hit new lows of 77 Rs from 290 Rs in Feb’07. Although rupee appreciation will hit company’s bottomline to some extent but importantly, neither the companys product nor its clients are price sensitive. However company is expected to register lower profit for FY08 since it is consolidating and expanding its operation. But from FY09 it will on a strong growth trajectory and won’t be looking back. It is estimated to clock a turnover of little less than 200 cr and PAT of around 19 cr. Still this translates into EPS of 14 Rs on diluted equity of 14 cr. That means scrip is currently trading at a P/E ratio of less than 6x times making it a screaming buy. Investors are strongly recommended to buy at current levels with a price target of 120 Rs (50% return) in a year’s time.