Nandan Denim- A Multibagger In The Making ?

Date: 14/09/2015

CMP: 110

Suggested Buying Zone: 110-95;

TGT: 200-250

Holding Period: 12-24 months

TSL<84

Rationale:

Nandan Denim (NDL) is one of the largest denim manufacturer in the world and in India, it’s the 2-nd largest. The company is on expansion mode which may be quite helpful for its growth as huge demand is there.

NDL has strong client base of some of the reputed domestic players in denim market like Color Plus, Gini & Jony etc. 

Apart from strong domestic market, it has also strong supply chain overseas and around 10% of revenue comes from those developed markets.

Thus it has strong potential to grow sequentially and denim market is also expected to grow above 15% CAGR in India also. In developed market, it has much more potential.

Looking ahead, with overall expected economic recovery, India's favorable demographic, increasing urbanization and forthcoming festival season can be the triggers for NDL. 

Also increasing acceptance of denims in work place may also act as trigger for such companies, including NDL.

Some risk is there in the form of volatility in raw material prices (cotton) and FX (Yuan/Dollar/EUR). Also, its top 10 clients contribute nearly 40% of its overall revenue, which poses some risk also for the company.

As par BG metrics estimated median valuation of NDL:

Current median valuation is around: 150

Projected fair valuations are around: 185-225-275 (FY: 16-18)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	LV	SV	MV	200-DEMA	10-DEMA
NDL	12.16	58.81	17.5	138.64	156.02	147.33	90.32	114.39
NDL	18.35	70.75	17.5	170.31	191.66	180.98	90.32	114.39
NDL	27.75	84.95	17.5	209.43	235.69	222.56	90.32	114.39
NDL	41.75	102.5	17.5	256.89	289.10	272.99	90.32	114.39

 

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