Microsec Research 08 September 2014

Analyst: amukherjee@microsec.in
We rate Archies Ltd a BUY. A renowned and leading company in the Social
Expressions Industry is all set to grow with its revamped business model with its
strategy of going online. Our rating underpins the companys focus on the new
model with core brand strategies in place.
Investment Highlights
The company is the leader in the Social Expression Industry: The social
Expressions Industry is still unorganized in India. There are very few serious
players having nationwide presence. The Company, which pioneered the
concept in Indian market, is the leader with more than 50% share of the
organized sector. Company continues to increase its Pan-India footprint.
Presently It has 240 owned and operated retail outlets has plan to open more 90
stores in phase manner over a period of next 3 years.
Strong brand with inexpensive valuation: Archies is a strong brand with super
connects between generations through its social expression products. The
Market Cap to sales of the company is just ~0.30 only which is way below for
leading brands. The company has reasonable financial strength and is a
consistent dividend paying company.
Strong growth visibility in online shopping: Over the last few years company
had made significant work in online shopping at www.archiesonline.com. To
make the shopping comfortable & satisfactory the number & variety of products is
continuous growing. The company has started servicing a few selective cities,
would cover all the cities in India by entering into tie-ups local courier service
provider.
Overseas market opportunity. Overseas markets offer vast opportunity.
Presently company is exporting its products to Sri Lanka, Bangladesh, UAE, UK,
Mauritius, Kuwait, Egypt, Kenya Uganda, Zambia, Russia, Botswana, Oman,
Rwanda, Libya and Ethiopia. The Company has plans to take active participation
in exhibitions and fairs to reach new markets and thus enhancing sales.
Company is likely to bounce back in sales of traditional products. Sales of
the traditional Greetings card of the company is likely to bounce back due to
larger base of young population in India and also due to awareness on media
penetration in new areas and also due to increased social connect between the
young, the middle aged and the old.
Archies Ltd. Time to say cheese
BUY
Sector Gift Articles, Toys & Cards
Analyst: Ajoy Mukherjee
Email ID: amukherjee@microsec.in
Promoter
and
Promoter
Group
61.74%
DII
0.38%
Non
Institutions
37.88%
FII
0.01%
Shareholding
BSE Code 532212
NSE Code ARCHIES
Bloomberg Ticker AGG IN
Reuters Ticker ARGG.BO
Face Value (INR) 2.00
Equity Share Capital (In INR Crs) 6.76
Average P/E NA
Beta vs Sensex 1.00
Average Daily Volume 2,24,628
Dividend Yield 2.0%
PEG Ratio NA
STOCK SCAN
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CLOSE(Archies Ltd) CLOSE(SENSEX)
Current Market Price (INR) 21.55
Target Price 37.00
Upside (%) 71.7%
52 Week High / Low (INR) 24.20/13.15
Market Capitalization (In INR Crs) 72.80
MARKET DATA
Particulars FY2012A FY2013A FY2014A FY2015E FY2016E
Net Sales 201.13 201.28 196.01 211.70 243.45
Growth (%) 6.88% 0.07% -2.62% 8.00% 15.00%
EBITDA 22.27 17.63 15.58 17.46 20.81
EBITDA Margins (%) 11.07% 8.76% 7.95% 8.25% 8.55%
Net Profit 9.50 7.01 5.24 5.82 8.30
Net Profit Margins (%) 4.72% 3.48% 2.67% 2.75% 3.41%
Net Profit Growth (%) -12.28% -26.21% -25.25% 11.07% 42.61%
EPS 2.81 2.07 1.55 1.72 2.46
BVPS 31.20 32.77 33.78 35.53 37.99
P/E 8.37 7.13 13.90 12.51 8.77
P/BV 0.75 0.45 0.64 0.61 0.57
RoE 9.37% 6.49% 4.66% 4.97% 6.68%
EV/EBITDA 3.87 2.95 4.61 4.40 3.69
Source: Company Data, Ace Equity, Microsec Research
Archies Limited Financial Performance (In crores except per share data & %)
Microsec Research 08 September 2014
Analyst: amukherjee@microsec.in
Brand Associations
Valuation
We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E EPS of
INR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for the stock, which
represents an upside of 71.70%, one year basis, from the current market price of INR21.55.
Risks & Concerns
Rent is one of the largest components in retail business. The rentals for premium locations are
significantly on an upward trend so it is affecting the bottom line of the company
Fluctuation in foreign currency rates adversely affects companys cost of raw materials.
Technology in the form of SMS and e-greeting had its toll on the growth of the greeting card
business.
Microsec Research 08 September 2014
Analyst: amukherjee@microsec.in
Brand Associations
Valuation
We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E EPS of
INR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for the stock, which
represents an upside of 71.70%, one year basis, from the current market price of INR21.55.
Risks & Concerns
Rent is one of the largest components in retail business. The rentals for premium locations are
significantly on an upward trend so it is affecting the bottom line of the company
Fluctuation in foreign currency rates adversely affects companys cost of raw materials.
Technology in the form of SMS and e-greeting had its toll on the growth of the greeting card
business.
Microsec Research 08 September 2014
Analyst: amukherjee@microsec.in
Brand Associations
Valuation
We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E EPS of
INR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for the stock, which
represents an upside of 71.70%, one year basis, from the current market price of INR21.55.
Risks & Concerns
Rent is one of the largest components in retail business. The rentals for premium locations are
significantly on an upward trend so it is affecting the bottom line of the company
Fluctuation in foreign currency rates adversely affects companys cost of raw materials.
Technology in the form of SMS and e-greeting had its toll on the growth of the greeting card
business.
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As on 31 July 2014
An amount of ` 1,00,000 invested individually in all 293 stocks ie, ` 2,93,00,000 investment as and
when recommended has appreciated to ` 3,97,23,649 giving a return of 35.6 percent. On the same
basis Nifty has given a return of 13 percent and CNXMID CAP has given a return of 15.2 percent.
Microsec Research 08 September 2014
Analyst: amukherjee@microsec.in
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