Financials

For the quarter ended December 2017, it registered a 24% rise in sales to Rs 355.92 crore. OPM improved 410 basis points to 79.93% which saw OP grow 51% to Rs 79.93 crore.

Other income fell 90% to Rs 86 lakh and interest grew 27% to Rs 2.54 crore. As depreciation fell 15% to Rs 5.44 crore, PBT grew 36% to Rs 72.81 crore. Tax rose 35% to Rs 25.02 crore after which PAT jumped 37% to Rs 47.78 crore.

For the nine months, it registered a 15% rise in sales to Rs 559.67 crore. OPM improved 240 basis points to 20.4% which saw OP rise 31% to Rs 114.17 crore.

Other income fell 47% to Rs 9.66 crore and interest fell 38% to Rs 6.11 crore. As depreciation went down 14% to Rs 15.88 crore, PBT grew 32% to Rs 101.85 crore. Tax rose 29% to Rs 33.29 crore after which PAT grew 33% to Rs 68.56 crore.

In FY 2017, sales had fallen 6% to Rs 584.10 crore. OPM had fallen 630 basis points to 13.2% which saw OP fall 36% to Rs 77.31 crore. PBT was down 30% to Rs 62.71 crore and PAT was 28% lower at Rs 42.32 crore. Performance was adversely affected due to demonitisation in the peak winter season, and mild winter in the previous season leading to stock returns and writeoffs. Higher contribution from non-woolen segment which have currently lower margins due to entry strategies have also contributed to decline in margins.

Well-known name in fashion

Monte Carlo is a well-known name in fashion. The products offered under brand Monte Carlo, apart from Woolen knitted garments, include T-Shirts, Shirts, Linen Shirts, Denim, Trousers, Dresses, Shorts, Tunics, Sportswear & much more for men, women and children (8-14 years age group).

Monte Carlo is recognized as ‘Superbrand' for woolen knitted apparels by Consumer SuperbrandsIndia since 2004. Under the umbrella brand of ‘Monte Carlo', the company has a comprehensive product portfolio across woolen, cotton & cotton blended, home furnishing and kids segments

It has various sub-brands under the Umbrella Brand ‘Monte Carlo'. These are:

‘Platine' -premium range for menswear & ‘Cloak and Decker' -economy range for menswear

‘Denim' -exclusive range for denim apparels

‘Alpha' -exclusive range for womenswear & ‘Tweens' -exclusive range for kidswear

‘ROCK IT' –Premium range for sportswear

The company's products reach the end user through different channels i.e. through Exclusive Brand Outlets, Multi Brand Outlets. Currently Monte Carlo is available through more than 200 Exclusive Brand Outlets & over 1300 Multi Brand Outlets.

Enjoys strong pricing power and unique business model

Being a premium brand, Monte Carlo enjoys strong pricing power. The company does not share discounts with Multi Brand Outlets (MBOs) and has limited discount sharing with franchisee owned Exclusive Brand Outlet (EBO).

The company follows order-to-produce model as such sales to MBOs and franchisee owned EBOs (FOFO) are pre-booked and as a result majority of revenues come from outright sales. Thus there is no inventory risk in case of sales to MBOs

Inventory is owned only in case of Company own Company operated, EBOs (COCO).

The company allows return of products only in case of National Chain Stores (NCS) (<10% of sales) and franchisee owned EBOs (5-15% return allowed).

While MBO sales are through exclusive commissioned agents and distributors, franchisee owned EBOs work on bank guarantee and PDC. It is due to this the company not suffered any bad debts till date.

Having pulse of the market

The company has strong design team of over 30 professionals who closely track the trending global fashion.

They also focus on developing new products, improving existing ones and forecasting fashion trends. It also undertakes regular market surveys by exclusive commissioned agents to understand consumer tastes and feedback.

Sound growth strategy

The company's focus on branding and promotion will further increase its visibility and market share across India.

In order to reduce the seasonality, the company is focusing on a comprehensive range of cotton and cotton-blended products which cater to all seasons. This strategy will also strengthen its pan-India operations.

To diversify and have a pan-India presence by penetrating into the southern and western regions of India, the company plans to focus on Online sales through own portal as well as Tie-ups with e-commerce portals such as Flipkart, Jabong, Snapdeal and India Shopping as well as through its own portal www.montecarlo.in.

Endeavour to build a leading branded apparel company

It continues with our endeavour to build a leading branded apparel company. Over the years, it has successfully expanded horizon and diversified our business operations. The company has created a comprehensive range of woolens, cottons, cotton blended, knitted and woven apparels for Men, Women and Kids and under the umbrella brand Monte Carlo. The company has successfully positioned itself as a lifestyle brand with a well-diversified product offering. Now, it is planning to further expand portfolio by diversifying into ‘Fitness and Fashion Wears' with a name of ‘ROCK IT'. The management expects this new segment should bring meaningful contribution to overall revenue in the coming years.

Valuation

The share price trades at Rs 561.