Leading brokerage firm Ashika Stock Broking maintains its positive outlook on Mirza International Limited (MIL). The brokerage suggests "buy" the stock of the company for gains up to 22% with a target price of Rs 370/share.
MIL is one of the leading leather footwear manufacturer with annual manufacturing capacity of 54 million pairs of shoes. It also markets and exports its shoes to overseas markets. It has integrated business model from processing leather to designing shoes to manufacturing and selling shoes in exports and domestic markets. MIL is the owner of the brands namely, REDTAPE, MODE, BONDSTREET, Oaktrak,Yezdi.
Mirza International is a small-cap stock having a market capitalisation of Rs 3,669.93 crore. The stock last traded at Rs 305.05/share on NSE, down 1.90% from its previous close. The stock is around 20% down from its 52 week high of Rs 375.60. Its 52-week low is Rs 85. In the past 1 year, it gave 209.7% multibagger returns. In the past 3 years it gave 437.53% multibagger returns, and in 5 years, it gave 93.74% positive returns.
Integrated business model
MIL operates through 6 fully integrated manufacturing units, equipped with advanced machinery and technology, which enable production of high-quality leather footwear. Its manufacturing facilities are supported by more than 25 dedicated ancillary units. MIL has robust ecosystem which enables it to secure uninterrupted raw material supply and achieve economies of scale and seamless operations. The company has 38 mn sqft of tannery manufacturing capacity, which is sufficient enough to double its revenue in the shoe business. As the company has captive tannery, it consumed nearly 50-60% of tannery production and rest, company sells in the markets. In the tannery business, the company follows stringent environmental norms and thus set up a dedicated effluent treatment plant of 1.65 MLD (Minimal Liquid Discharge) capacity which helps in meeting environment norms. The backward integration helps MIL to ensure uninterrupted supply of raw materials in this challenging environment. Company also follows asset light model in which MIL has entered into a strategic outsourcing agreement with reputed vendors for manufacturing footwear, apparels and accessories production. Company sets stringent quality standards & specifications and vendors need to follow that rigidly. Thus, it helps the company to scale up its business in an asset-light manner while maintaining its brand equity.
Follows Omni channel model
MIL has presence in diverse formats include EBOs (Exclusive Brand Outlets) and e-commerce platforms. It has total 348 EBOs in India across 188 cities with a combined 8,15,818 sq. ft. area, including 111 Company owned Company-operated (COCO). It also has presence in 245 shops in shop and 8 online portals in India. Further, the company is targeting to grow its domestic brand business by expanding in new locations through EBOs and modern retail outlets. The company management believes that EBOs and modern retail outlets would be the future for marketing and retailing branded products. The company aims to expand its presence through EBOs in tier-2 and tier-3 cities largely through franchisees. In FY22, the company added 72 new offline/online EBOs primarily in Tier 2 & 3 cities where there are tremendous opportunities. MIL has also established its presence on 10 online e-commerce platforms given the rapid growth of consumers buying online led by accelerated digital adoption. Moreover, to drive the e-commerce strategy and growth, the company has set up warehouse in Noida, UP. As of FY22, e-commerce accounts for nearly 26% of domestic branded sales while EBOs accounts for the rest 74%. Hence, MIL is strengthening its Omni channel presence in order to penetrate more and gain market share.
Strong focus on export market
Over the years, MIL has earned the reputation of admired footwear exporter in the international arena. Company has long standing relations with top retail chains in the UK, US, France, Germany, Australia and UAE. In the international market, the company has positioned itself as a preferred supplier, thus showcasing its solid reputation of trendy and quality products, supply chain agility and sustainable operations. Over the period, MIL has established premium footwear brands in the UK, US, France, Germany and UAE. MIL, through 1,000 MBO (Multi Brand Outlets) in UK sells Thomas Crick and REDTAPE brands. It has 8 exclusive showrooms in Dubai, Sharjah, Nepal and Sri Lanka. Further, it has presence in 6 global online portals, thus strengthening its omni channel presence globally. The company has built a global network that spans in 37 countries throughout the UK, Europe, USA, Canada, Australia, and New Zealand. Currently, exports account for nearly 30% of the revenue, which the company aims to increase further.
Reported healthy 2QFY23 numbers
MIL reported healthy growth during 2QFY23 on all fronts. Revenue during the quarter grew by 23% YoY, while sequentially the growth has been flat. EBITDA in absolute terms grew by 32%, though sequentially it declined by 16% due to pressure on raw material costs, which is expected to ease in coming quarters. Despite high commodity inflation, the company witnessed an improvement in EBITDA margin by 97 bps YoY at 13.3%. Sequentially, EBITDA margin declined by 240 bps. Higher revenue and EBITDA growth led the higher PAT growth which grew by 22% YoY, though it declined by 20% QoQ. PAT margin during the quarter remained flat at 6.8%. Increasing brand conscious and expanding reach will drive its earnings growth going forward.
As the COVID cases started waning, mobility has increased since March of 2022 and that has increased the use of footwear. Offices and schools have opened, which creates an incremental demand for shoes and that benefits the shoe manufactures. MIL, being the integrated shoe manufacturers having captive tannery has capitalized the opportunity efficiently. Having captive tannery, the company was insulted from higher input price inflation to large extent. After growing in metro cities, management has now shifted its focus to tier 2 & 3 cities where management sensed larger growth opportunities. "MIL has strengthened its omni channel presence through mix of adding EBOs and online portals. Further, in footwear category, its flagship Redtape brand is priced at the highest end of its peers in India, hence it enjoys strong brand equity. MIL also has a strong export market which contributes around 30% of the topline and management intends to increase it further. Hence, we hold our Positive view on MIL given the strong brand equity, expanding its reach, presence in both offline and online and strong export market. We, recommend our investors to BUY the scrip with target of Rs 370 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 24.1X on FY24E EPS," the brokerage said.
The stock has been picked from the brokerage report of Ashika Stock Broking. 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.