Buy This Multibagger Small Cap Stock, Shares Can Jump, Gave 2116.94% Returns in 5 Years

Small Cap Apparels sector Company Cantabil Retail India Ltd., gets a buy call from Ventura Securities. The brokerage has recently published a report suggesting buy the stock of the company for an estimated target price of Rs 2,156 apiece. Considering the stock's current market price and the brokerage's estimated target price, the stock is likely to surge up to 44% in 18 months. Cantabil Retail India has a market cap of Rs 2,448.32 crore.

Stock Outlook

The current market price of the stock is Rs 1,494.90 apiece. The 52 week low of the stock was recorded on 6 September 2021 at Rs 369 apiece and the 52 week high was recorded on 30 August 2022 at Rs 1,589.90 apiece. The stock is currently trading near its 52 week high.

Returns of Investments

The stock in the past 1 week has fallen 1.71%. However, in the past 1 and 3 months, the stock surged and gave 30.47% and 31.57%, respectively. Over the past1 year, the stock gave a multibagger return of 258.61%. Whereas, in the past 3 years, the shares gave a multibagger return of 602.86%. In the past 5 years, the shares gave a whooping multibagger return, around 2115.94%.

Business Updates

After the restructuring of its retail business (during FY11-14), Cantabil Retail India Ltd (CANTABIL) rose like a phoenix and emerged as a formidable player in the organized apparel retail space. A distinctly visible strategy of CANTABIL to tap under discovered markets of Tier II & III cities of India (often neglected by foreign & marquee brands) is gaining momentum. The company has a network of 414 exclusive retail outlets (as on 31st Aug 2022) covering an area of 4.6 lac sq ft in 18 states (up from 241 stores & 2.6 lac sq ft area in FY19).

 

Business Performance

During FY15-20, the Indian retail apparel market grew at a CAGR of 10.0% and was pegged at ~US$ 66 bn in FY20, while the share of organized retail improved from 23.0% to 32.0% over the same period. As per the Technopak Analysis report, this market is estimated to cross the US$100 bn mark by FY25 (CAGR of 8.7% during FY20-25) with a higher organized space share of 44.8% due to favourable changes in the demographic profile of India and rapid urbanization which is improving brand awareness in Tier II & III cities.

Investment Rational

Citing this opportunity very early, CANTABIL has been adding 50-60 retail stores annually. In line with this, 57, 61 and 58 stores were opened in FY19, FY20 and FY22, respectively, and 30 new stores were added in Apr-Jul 2022 (FY23). The annual expansion rate is expected to improve in the coming years, and the focus will be on Tier II & III cities, which are evolving as new demand centres.

Ventura Securities Suggests buy for a target price of Rs 2,156 apiece

We initiate coverage with a BUY for a price target of INR 2,156 (12X FY25 EV/EBITDA), representing an upside of 45.6% for the CMP of INR 1,482 over the next 18 months. Our optimism stems from the following:

• Over the period of FY22-25E, we expect CANTABIL's store count to increase to 596 and revenue/ EBITDA/ PAT to grow at a CAGR of 35.6%/ 37.0%/ 77.1% to INR 957 cr/ INR 287 cr/ INR 144 cr, respectively.

• EBITDA and PAT margins are expected to improve by 90bps to 30.0% and 864bps to 15.4% due to higher per-store realization and a decline in finance costs on account of faster debt repayment.

• Return ratios - RoE and RoIC - to improve by 2053bps to 36.7% and 2639bps to 68.0% respectively by FY25E.

 

Disclaimer

The stock has been picked from the brokerage report of Ventura Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.