Mirza International Ltd (MIL) is engaged in manufacturing and marketing leather and leather footwear. It exports its products to the European Union, Germany, the United Kingdom, the United States, Italy, and France among other geographies. Its brands include Red Tape and Oaktrak.In the branded domestic segment, we expect the company to report a ~24% CAGR over FY2016-18E to `346cr. We anticipate strong growth for the company on the back of (a) the company’s wide distribution reach through its 1,000+ outlets including 120 exclusive brand outlets (EBOs) in 35+ cities and the same are expected to reach 200 over the next 2-3 years and (b) strong branding (Red Tape) in the shoes segment. Further, MIL is enhancing its brand visibility owing to higher ad spend in FY2017. MIL has doubled its ad spend over the last five years; ad spends as a proportion of branded product sales now stand at 9-10%.
Valuation: At the current market price of `84, the stock trades at a PE of 12.2x and 10.5x its FY2017E and FY2018E EPS of `6.9 and `8.0, respectively. They initiate coverage on the stock with a Buy recommendation and target price of `113 based on 14x FY2018E EPS, indicating an upside of ~34% from the current levels.