Saral Gyan Hidden Gem - Feb 2012

UNEXPLORED MULTIBAGGER SMALL CAP STOCKS

EQUITY RESEARCH REPORT

SUPERHOUSE LTD

BSE CODE: 523283

Industry: Leather / Leather Products
Market Cap: 55.04 (Crores)
Date: February 29, 2012

CMP: Rs. 48.20 (29/02/2012)
Target Price: Rs. 110
Time Period: 18 – 24 months

Saral Gyan Capital Services
www.saralgyan.in
An Independent Equity Research Firm

HIDDEN GEMS – FEB 2012

TABLE OF CONTENT
S.No

Content

Page No.

1.

Company Background

03

2.

Recent Developments

07

3.

Financial Performance

10

4.

Charts & Graphs

12

5.

Peer Group Comparison

14

6.

Key Concerns

14

7.

Industry Overview

15

8.

Future Outlook

17

9.

Saral Gyan Recommendation

18

10.

Disclaimer

19

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SARAL GYAN CAPITAL SERVICES


1. Company Background
Superhouse Ltd is a group of several companies engaged in manufacturing and export of
finished leather, leather products and textile garments. The parent company, Aminsons
Leather Finishers Pvt., was incorporated as private limited company on January 14,
1980. It was converted into a public limited company on December 22, 1984 and its
name changed to Aminsons Limited on February 21,1989. In addition, five group
companies - Super House Limited, Super Garments Limited, Sharp Leathers Limited,
Super Footwear Limited and Allen Shoes Limited - were merged with Aminsons Limited
in 1994, 1995 and 1996 as per the orders of the Hon’ble High Court of Judicature,
Allahabad. The name of the company was changed to Superhouse Leathers Limited on
March 4,1996 and finally Superhouse Limited on November10, 2006 with the approval
of the Registrar of Companies, Kanpur (U.P.).
From a single tannery in the 1980’s producing finished leather, Superhouse Group has
emerged as one of the largest players in the industry. It started with a commitment to
excel, achieve and deliver the very best. Towards this end, company engineers,
optimizes and controls every phase of the manufacturing process from raw material to
finished products to ensure that end products are of the highest quality and also the
best value for money for their clients.
SUPERHOUSE Range of Exported Products

The Superhouse Group has four overseas companies in the UK, the U.S.A., the U.A.E.
and Romania, primarily engaged in marketing and distribution of leather, leather
products and textile garments.
The Group has crossed an annual turnover of Rs. 4,000 million. The Group has 15
manufacturing units located in Kanpur, Unnao, Agra and Noida

-3-



Manufacturing Facilities
1. Finished Leather
Tannery I

Tannery II

Tannery III

Tannery IV

2. Men’s Footwear
Footwear Division I

Footwear Division II

Footwear Division III

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3. Ladies Footwear

4. Children’s Footwear

5. Safety Footwear
Safety Footwear Division I

Safety Footwear Division II

6. Leather Accessories

7. Riding Products

8. Readymade Garment

9. Safety Wear Division

-5-



Achievements - Rewards & Recognitions
2008-09

Commendable Export Performance 2008-09 Silver Trophy.
Presented by Council for Leather Exports.

2008-09

Best Export Performance 2008-09 Non-Leather Saddlery & Harness.

2008-09

Commendable Export Performance 2008-09 for Finished Leather
Presented by Council for Leather Exports

2008-09

Commendable Export Performance 2008-09 for Footwear Components
Presented by Council for Leather Exports

2008-09

Outstanding Award State Export Award 2008-09
Presented by Uttar Pradesh Government.

2007-08

Commendable Export Performance 2007-08 Silver Trophy.

2007-08

Best Export Performance 2007-08 Non-Leather Saddlery & Harness.

2007-08

Trading House Certificate.
Presented by Ministry of Commerce and Industry, Government of India.

2007-08

Outstanding Award State Export Award 2007-08
Presented by Uttar Pradesh Government

2007-08

First Prize State Export Award 2007-08
Presented by Uttar Pradesh Government

2006-07

Best Overall Export Performance 2006-07 Gold Trophy

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2. Recent Development
A) Superhouse Brands entry in Indian Markets
1. Allen Cooper
Until now, Allen Cooper had been enjoying the prestigious
patronage of British and European markets. The brand has now
stepped into the Indian market and is catering to the
requirements of corporate and institutional customers, creating
a niche image for its fashion leather products adhering to the
high standards that the British have set, Allen Cooper’s range of
products boasts of an array of international designs through its Italy, UK, China and India
based design studios.
However, Allen Cooper has not rested on its laurels. It is acquiring the best of Indian
patterns and is continuously innovating products with imagination and realism, leaving
competition miles behind. Indian customers have taken very well to Allen Cooper
products and the demand is growing daily among quality conscious customers
demanding international class. The response has been overwhelming and Allen Cooper
will soon be spreading its wings across India to cater to customer’s wishes.

2. Double Duty
Double Duty is a brand owned by Superhouse Ltd for
marketing safety footwear and garments mainly to Gulf
countries and European countries.
Double duty is the only brand in export market under
which we produce safety shoes with Direct Injection PU,
PU/TPU, Goodyear welted and Direct vulcanizing process meeting to all international
safety norms.

-7-



B) Up-gradation in Research & Development
Superhouse Group is committed to continuous Research and Development,
technological innovation, up-gradation and improvements to achieve ever-higher
standards of quality.
The Research and Development facilities of the Group:
*
*
*
*
*
*
*
*

Separate Research and Development Departments for every factory.
Separate Design Centers for Shoes, Bags, and Garments.
Specialized design center in China.
Renowned designers from various countries.
CAD-CAM facilities at shoe factories.
CAD-CAM facilities at fashion garment units.
State-of-the-art laboratories at the tanneries.
R & D and design centers.

Superhouse R & D and Design Centers
Design Center in China
C103, No. 603-613 Xicha Road,
Baiyun District Guangzhou, CHINA

CAD-CAM Facilities, Footwear Division-I
D-15, Industrial Area,
Site-II Unnao - 209801 UP, INDIA

CAD-CAM Facilities, Footwear Division-II
Plot No. A 3, Export Promotion Industrial Park
Agra – 282007, INDIA

CAD-CAM Facilities, Readymade Garments Div
A-14, Sector-65, Phase – III,
Noida - 201303 UP INDIA

-8-



C) Participation in International Fairs
Fashion Footwear

Country

Riva Del Garda

Italy

Micam Shoe Event

Italy

Safety Footwear

Country

A+A

Germany

Expo Protection

France

Safety and Health Expo

U. K.

Sicur Tech

Spain

Finished Leathers

Country

Roslegprom

Moscow

Aplf

Hong Kong

Lineapelle

Italy

Readymade Garments and Riding Products

Country

Spoga Fair

Germany

Beta Fair

U. K.

Indian Intl Garment Fair

India

Leather Garment & Accessories

Country

Mipel

Italy

-9-



3. Financial Performance
Superhouse net profit rises 30.71% in the December 2011 quarter
Net profit of Superhouse rose 30.71% to Rs. 51.5 million in the quarter ended December
2011 as against Rs. 39.4 million during the previous quarter ended December 2010.
Sales rose 3.16% to Rs. 1065.1 million in the quarter ended December 2011 as against
Rs. 1032.5 million during the previous quarter ended December 2010
FY 2010-2011 Result Updates:
For the audited full year, net profit rose 25.86% to Rs. 171.8 million in the year ended
March 2011 as against Rs. 136.5 million during the previous year ended March 2010.
Sales rose 24.68% to Rs. 4432 million in the year ended March 2011 as against Rs.
3554.7 million during the previous year ended March 2010

- 10 -



Current & Expected Earnings:
Quarterly Ended Profit & Loss Account
Particulars
(Rs in Millions)
Audited / UnAudited

Net Sales
Total Expenditure
PBIDT (Excl OI)
Other Income
Operating Profit
Interest
Exceptional Items
PBDT

Mar
2011

Jun
2011

Sep
2011

Dec
2011

Mar
2012 E

Jun
2012 E

UA

UA

UA

UA

UA

UA

1278.9

1068.01

1323.99

1079.84

1396.88

1184.79

1147.15

956.02

1170.22

951.94

1198.34

1027.25

131.75

111.99

153.77

127.9

198.54

157.54

1.51

0.65

1.3

2.52

2.45

1.72

133.25

112.64

155.07

130.42

200.99

159.26

20.59

26.06

27.61

26.03

32.12

28.01

0

0

-19.05

0

0

0

112.67

86.58

108.41

104.39

168.87

131.25

Depreciation

22.78

23.75

23.75

24.83

25.35

25.92

Profit Before Tax

89.89

62.83

84.66

79.56

143.52

105.33

Tax

31.65

20.53

27.53

28.09

44.48

35.15

Provisions & contingencies

0

0

0

0

0

0

58.24

42.3

57.14

51.47

99.04

70.18

Extraordinary Items

0

0

0

0

0

0

Prior Period Expenses

0

0

0

0

0

0

Profit After Tax

Other Adjustments

0

0

0

0

0

0

Net Profit

58.24

42.3

57.14

51.47

99.06

70.18

Equity Capital

114.2

114.2

114.2

114.2

114.11

114.11

10

10

10

10

10

10

5.1

3.7

5

4.51

8.68

6.15

20.4
501545
8

14.82
501545
8

20.01
501550
8

18.03
501530
8

34.72

24.6

5016458

5016458

45.49

45.49

45.49

45.49

45.49

45.49

Face Value (IN RS)
Reserves

Calculated EPS
Calculated EPS (Annualised)
No of Public Share Holdings
% of Public Share Holding

0

Expected Earnings for 4th Qtr FY 2011-12:
We expect Superhouse Ltd will post good growth in coming quarters with rising demand
in leather exports and by launching more brands in Indian market. We believe, FY 2012
– 13 will prove to a good year for the company with revival in world economy.
In financial front, company’s performance has improved significantly in last couple of
quarters. Superhouse has posted 30.7% growth in net profit in Dec’11 quarter.

- 11 -



4. Charts & Graphs
i) Share holding Pattern:
Promoters share holding in Superhouse Ltd is 54.5 %, increased significantly in last 5
years.

ii) Share Price Moving Average:
Superhouse is currently trading near its 50 day price moving average. Stock has strong
support at 42 Rs levels.

- 12 -



iii) Performance Chart:
Company has shown consistent growth in terms of sales and profits year after year.

iv) Comparative Graph:

- 13 -



5. Peer Group Comparison

PEER GROUP
CMP
52 W H/L
Market Cap
Results (in Cr)
Sales
PAT
Equity
EPS

P/E

Superhouse
Mirza
Ltd
International
48.20
19.55
55.45/39.70 26.10/16.00
53.14
181.24
Dec-11
Dec-11
107.98
147.40
5.15
7.98
11.41
18.54
4.51
3.90
2.5
5.02

Mayur
Bhartiya
Liberty
Leather
International
Shoes
29.75
112.25
91.50
51.20/23.25 78.10/37.35 108.60/56.90
14.38
56.86
155.91
Dec-11
Dec-11
Dec-11
5.74
65.71
84.14
0.13
1.77
2.51
4.83
10.06
17.04
0.05
6.45
3.98
599.31
8.76
23.01

6. Key Concerns / Risks
i) Dependency on exports with less exposure in domestic market.
ii) Increase in labour cost and raw material cost can reduce operating and profit
margins significantly
iii) Global slowdown in demand can affect exports of leather goods.
iv) Use of alternatives like artificial leather to save animals can also impact growth
of leather companies.

- 14 -



7. Industry Overview
The Leather Industry holds a prominent place in the Indian economy. This sector is
known for its consistency in high export earnings and it is among the top ten foreign
exchange earners for the country.
With an annual turnover of over US$ 7 billion, the export of leather and leather
products increased manifold over the past decades and touched US$ 3.40 billion in
2009-10, recording a cumulative annual growth rate of about 5.43% (5 years).
The Leather industry is bestowed with an affluence of raw materials as India is endowed
with 21% of world cattle & buffalo and 11% of world goat & sheep population. Added to
this are the strengths of skilled manpower, innovative technology, increasing industry
compliance to international environmental standards, and the dedicated support of the
allied industries.
The leather industry is an employment intensive sector, providing job to about 2.5
million people, mostly from the weaker sections of the society. Women employment is
predominant in leather products sector with about 30% share.
Though India is the second largest producer of footwear and leather garments in the
world, India accounts for a share of close to 3% in the global leather import trade of US$
137 billion (2008).
The major production centers for leather and leather products are located in Tamil
Nadu - Chennai, Ambur, Ranipet, Vaniyambadi, Trichy, Dindigul ; West Bengal – Kolkata
; Uttar Pradesh – Kanpur, Agra & Noida ; Maharashtra – Mumbai ; Punjab – Jallandhar ;
Karnataka – Bangalore ; Andhra Pradesh - Hyderabad ; Haryana - Ambala, Gurgaon,
Panchkula and Karnal; Delhi
Strengths of Indian leather sector
1. Own raw material source – 2 billion sq ft of leather produced annually
2. Some varieties of goat / calf / sheep skins command premium position
3. Strong and eco-sustainable tanning base
4. Modernized manufacturing units
5. Trained / skilled manpower at competitive wage levels.
6. World-class institutional support for Design & Product Development, HRD and R & D.
7. Presence of support industries like leather chemicals and finishing auxiliaries
8. Presence in major markets – Long Europe experience
9. Strategic location in the Asian landmass

- 15 -



Emerging strengths
1. Design development initiatives by institutions and individuals
2. Continuous modernization and technology up-gradation
3. Economic size of manufacturing units
4. Constant human resource development programs to enhance productivity
5. Increasing use of quality components
6. Shorter prototype development time
7. Delivery compliance
8. Growing domestic market for footwear and leather articles

India Leather & Leather Product Export (2009-2010)

Country wise Exports from India (2009-2010)

- 16 -



8. Future Outlook
Leather & Leather Products Exports – 2005 - 2010
India’s export of leather and leather products for last five years
(Value in Million US$)
EXPORT ITEMS

2005-06

2006-07

2007-08

2008-09

2009-10

Finished Leather

636.27

724

807.19

673.37

625.54

Footwear

1045.24

1236.91

1489.35

1534.32

1507.51

Leather Garments

333.3

309.91

345.34

426.17

428.52

Leather Goods

660.17

706.28

800.46

873.44

756.02

Saddlery & Harness

77.52

82.33

106.18

92.15

83.39

Total

2752.5

3059.43

3548.51

3599.46

3400.97

% Growth

10.30%

11.15%

15.99%

1.44%

-5.51%

The Government of India had identified the Leather Sector as a focus sector in its
Foreign Trade Policy 2004-09 in view of its immense potential for export growth
prospects and employment generation. Accordingly, the Government is also
implementing various Special Focus Initiatives under the Foreign Trade Policy for the
growth of leather sector. With the implementation of various industrial developmental
programmes as well as export promotional activities, and keeping in view the past
performance, and industry’s inherent strengths, the Indian leather industry aimed to
augment the production, thereby enhance export to US$ 7.03 billion by 2013-14, and
resultantly create additional employment opportunities for overall one million people.

- 17 -



9. Saral Gyan Recommendation
With government plans to focus on leather exports with special initiatives, Indian
Leather & Leather goods companies are expected to post good growth in coming
years. Superhouse Ltd being one of the major leather export company is
expected to achieve double digit growth in sales & profits in next 2 years.
Stock is currently trading at a price to earning ratio of 2.5, which makes the stock
valuations cheap when compared to its peers. Most of the peer companies PE is
in the range of 7 to 18 with lesser top line and bottom line growth, this makes
Superhouse a best buy in leather & leather goods segment.
As per our estimates, Superhouse can deliver bottom line of 300 million for full
financial year 2012 – 13, annualized EPS of Rs. 25.2 with forward P/E ratio of 1.9
X for FY 2012-13, which makes stock of the company an attractive bet at current
market price.
Company has paid regular dividend from 2006 onwards. The last dividend paid
was 15% in last month. Dividend yield at CMP is at 3.1%.
On equity of Rs. 114.11 million the estimated annualized EPS works out to Rs.
25.2 and the Book Value per share is Rs. 114.55. At a CMP of Rs. 48.20, stock
price to book value is 0.42. The scrip is trading at 19. X FY 2012-13 estimated
earnings which make it an attractive buy when compared to its peers.
Saral Gyan Team recommends “BUY” for Superhouse Ltd. at current market price of
48.20 for a target of Rs. 110 over a period of 18-24 months.

- 18 -



10. Disclaimer
Important Notice: Saral Gyan Capital Services is an Independent Equity Research Company.
Disclosure: The author of this article does not hold shares in the recommended company.
© SARAL GYAN CAPITAL SERVICES
This document prepared by our research analysts does not constitute an offer or solicitation for
the purchase or sale of any financial instrument or as an official confirmation of any transaction.
The information contained herein is from publicly available data or other sources believed to be
reliable but we do not represent that it is accurate or complete and it should not be relied on as
such. Saral Gyan Capital Services (www.saralgyan.in) or any of its affiliates shall not be in any
way responsible for any loss or damage that may arise to any person from any inadvertent error
in the information contained in this report. This document is provide for assistance only and is
not intended to be and must not alone be taken as the basis for an investment decision.

- 19 -


Saral Gyan Hidden Gem - Feb 2012

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