Monte Carlo Fashions Ltd. share price target

We estimate a 20% CAGR revenue, over FY22-24E. We expect MCFL to post 9.80% PAT margin during FY22-24E. Currently, MCFL is trading at a 8.69x EV/EBITDA multiple (FY22), we assign a Forward EV/EBITDA multiple of 7.4x as of Dec 2022.

The past two years have been challenging for Monte Carlo; a weak winter alongwith e-commerce competition resulted in a weak FY16. The third quarter accounts for more than 50% of annual...

Monte Carlo Fashions Ltd. (Monte Carlo) was launched in 1984 by Oswal Woollen Mills Ltd as an exclusive woollen brand and today leads the woollen wear segment in India. The company...

Over the past two years, MCFL's revenue growth has been impacted by challenging macroeconomic conditions such as weak winter, subsequent inventory build-up and demonetisation. However, product and geographic diversification, coupled with the expectation of a favourable winter in FY18 bodes well for the company. We believe that scaling up of: i) sub-brands, ii) institutional sales, iii) EBO network and iv) online sales are the key growth avenues for MCFL....

We recently attended the Monte Carlo (MCFL) analyst meet to understand the business model and outlook, going forward. MCFL, launched in 1984, is India's established and leading brand in the largely unorganised woollen apparel market (90% unorganised) having a dominant presence in northern and eastern regions. Over the years, MCFL has diversified its offerings into the cotton segment, home furnishing and kidswear, to mitigate seasonality risk and reduce dependency on winter wear products. The efforts of the management were visible with the share of...

Over the FY13-17 period Monte Carlo's revenue, EBITDA and PAT have grown at a CAGR of 9.6%, 2.3% and (3.6)% respectively. The EBITDA and PAT margins for the year are low mainly on account of a week Q3FY17 sales on account of demonitisation which accounts for over 60% of the annual revenue which led to the company offering tactical discounts during Q4FY17 to clear their inventory levels. The company is not looking to undertake any CAPEX activity over the next two years and would further look to reduce the number of inventory days. The management has provided a revenue growth guidance of 15-18% for FY18E on the back of a strong...

We interacted with the management of Monte Carlo Fashions Limited (MCFL) to understand its underlying fundamentals. MCFL (founded in 1984) is the largest winter wear brand in the ~$2.2bn woolen apparel domestic market, which is largely unorganized (~92%) with MCFL having a ~2-3% market share. The company's core namesake brand is synonymous with premium woolen wear, and it also has several other sub-brands to target other segments. The company has diversified into cotton (47% of sales), kids clothing (5%) and home furnishings (10%) (segments include winter themed apparel/items) to reduce dependence on the seasonal woolen wear segment. Structural Risks/Challenges: 1) Seasonal business model with ~55% of sales in December quarter; 2)...

Increased focus on cotton and cotton-blended products in order to decrease dependence on seasonal products: Monte Carlo, an established and leading brand in the largely unorganised woollen apparel market of $2.3 Bn, grew at a CAGR of ~ 16% over FY12-15. With better product mix and diversified product range, the company's efforts to diversify from seasonal products to cotton and cotton blended products, on the back of strong distribution network, we expect the revenues to grow by 13% CAGR for FY15-FY17E.