I have recently come accross a stock named Spenta International which is a textile stock operating on a relatively niche area like Socks. Below are the analysis I have made.

Sales Growth :-

Pasted image1104x81 5 KB

As we can see the company is
making a sales growth CAGR of 16% over last 10 years hence this is a
commendable job and mostly inline with management expectation of making 20% CAGR
for coming 2-3 years but the considering individual years the growth they are
mostly fluctuating which is a cause of concern from strategic point of view of
the management.

Profit Margin :-

Pasted image1104x321 14.7 KB

The profit margin both OPM and NPM
is not very satisfactory and mainly on the decreasing side hence it will
clearly show they do not have a bargaining power over it's consumer. Though
they have recently felt the urgency to create their own brand and increasing
export hence this might be a good step in increasing the Profit Margin but only
time will tell.

Value Creation :-

Pasted image1104x101 6.82 KB

Over the years it is not well
known for creating any value for the share holder but this year it really does
it also from above you can see they have started to giving dividend so the
focus has changed and could have been a very good value investment opportunity.

Tax Payment :-

Pasted image1030x101 5.27 KB

Tax payment is at per with corporate
tax [30-34%]rate hence not a problem with that but there is a ongoing dispute
with the IT of 48Laks.

Interest Coverage :-

Pasted image1030x101 5.67 KB

Interest coverage is 5-6% always
hence a very good cover they have on their debt.

Debt :-

Pasted image1030x181 9.35 KB

Debt is mostly very low and they
have have significantly reduce it in last three years also DE ration is under
control of 0.14-0.16 level.

Current Ratio :-

Pasted image1030x201 10.7 KB

Current ratio is good hence we can
conclude there is ample amount of liquidity in the business.

Cash Flow :-

Pasted image1030x141 7.59 KB

Cash flow is really good which is a
commendable job by the management and show there conservative mentality also
collection of cash remain stable and consistent.

Self Sustainable Growth Rate :-

This is the parameter by which we
can judge weather a company is able to survive in future from it's internal
operation without a much requirement of cash inflow into the business.
Generally an average of 30-40% SSGR is good and stable.

Pasted image1104x361 20.6 KB

The company does not have a good
track record of SSGR and mostly on the -ve side hence the future capital
requirement for the company is on the card if they will plan for expansion. As
we have earlier discussed that margin has suffered for the company so this is a
prime reason for -ve SSGR coupled with high depreciation rate of it's asset
which means they are in a requirement of continuous replacement of their
asset and also they have started paying dividend from this year which is
a good sign for the shareholder but will cost the business. So if the company
wants expand capacity or global footprint they will be requiring cash inflow
outside of their internal business operation though the CFO and free cash flow
is good and the company have ample cash in hand but this will again affect the
Dividend payout plan of the company. So the way I see it if they will be able
to increase Profit Margin this ratio will automatically improve and might not
be a cause of concern.

Valuation :-

Pasted image720x578 23.8 KB

Before taking an investment decision
we have to check couple of point :-

1. PE is at 28 hence on the higher
   side and we have no margin of safety.

2. PEG stands at 0.9 i.e. under one
   which shows there is a ample amount of growth left as the market cap is only
   48Cr.

3. PB ratio is at 2.8 and PS ratio
   is at 1.3 which are really good investment rationale.

4. EV to EBITDA ratio is at 10.8
   hence a good bargain.

5. DCB is -ve and mainly due to same
   reason for SSGR though here we are interested in CFO instead of PAT but as the
   company is good at collecting cash so both are having the same explanation. We
   have to have a Hawk eye on NPM and Sales CAGR.

Any help in this stock will be very helpful for me as I am relatively new in this domain. So if anybody has any information please share your view in this stock.

many thanks,
Krishnendu

Dear Ragunathan,

Thanks for your views. Arvind and Nandan are totally different - in terms of their market and style.
Nandan is a mass market player - increasing its sales through market penetration whereas Arvind plays globally through differentiating its products. Indian domestic industry has bee growing at CAGR of 15-18% over several years. Global markets have been increasing at 3-5% CAGR only. Arvind is going to obviously face growth problems since the industry growth rate is in single digits. Moreover, Arvind has been from the very beginning concentrating on more than one items like knitting and has now entered into cosmetics also. Nandan is focussed purely into denim over years.
I am a CA and my firm had Arvind as its client. There is a huge difference between the mgmt of both the companies.
According to me lack of concentration on denim business, mgmt (weak corp governance) and overall global denim market impacted Arvind. Nandan seems to be far far better than Arvind. I might be wrong, and I respect your views. Just keeping my views on the table for a healthy discussion.

Unfortunately, couldn't find any reasons why the stock has touched upper circuit today! Any pointers here?

Yes vivekbothra,
Your calculation is correct. Suven has raised these 200 crores last year thru QIP route only for this purpose. And most probably, considering the accounting policy they follow, they will charge it in PandL only in next two years. Say 100 crores per year. And surely profit will go down to that extent. That's how it normally works. If successful, it will give multifold gains, else again at normal profit of 125-150 crores from years thereafter.

But the best and most important part, which I liked the most is they raised capital for it and didn't go for debt route. They diluted some 10% capital for raising 200 crore, so effectively if the project fails, we all shareholders will lose 10% of our value. Had they taken debt, there would have been burden repay the same with interest and that could have spoilt balance sheet structure. In event of success, it will be multi fold profits and again we will be parting 10% of that profit to QIP shareholders. But that's ok. Right??

Happy investing.

Disclosure - Invested from level of Rs. 30 and with price appreciation, its nearly 30% of my portfolio.
Wont sell single share till final outcome of SUVN-502.

In my opinion its a bit expensive on valuation. Listed player like Apollo Hospitals is available at cheaper valuation IMHO.