Sreeleathers continues to impress in terms of achieving consistent revenue and profit growth of about 20% in each year for 5 years in a row. Further, the company has near zero debt, with no long term borrowing and only Rs. 1 cr in short term borrowing as of March 31, 2018.
The stock currently trades at around Rs. 250, up from Rs. 125 recorded in October 2016. Its TTM PE ratio currently stands at Rs. 29.9 when compared to the industry PE ratio of Rs. 49.9. The stock price hit a peak of Rs. 342 in December 2017 and since then has been ranging in between Rs. 290 to Rs. 227. The growth in its stock price hasn't been consistent though given the strong and consistent financials, which raises a red flag.
A brief about the company:
Sreeleathers (SL) was founded, as a small organization in Jamshedpur. It later expanded the business to become a leader in Eastern India, and gradually entered the international market. At present, Sreeleathers caters to public demand with a wide range of shoes and allied products and accessories. Over the years, it has grown to become a household brand exemplified by the queues outside the stores during festivals.
The company credits its success to its philosophy of "World Class, Right Price". With this motto the company has steadily established itself in the national as well as international markets. The store locator indicates that the company has expanded to mainly North Indian market with about 5 stores and 1 store in the South Indian market. It lacks presence in West India. SL also has an online presence and its range of products are displayed on its website and are available for purchase.
It operates in a high growth sector, below is the expected market growth and trends in India footwear market:
India is the second largest producer of footwear in the world, next to China and has an ever growing domestic market. Annually, India produces about 2.5 Billion pairs and it is estimated that production of footwear will exceed 4 billion pairs by 2020. The per capita consumption of footwear in India is set to grow rapidly from its existing level of 1.7 pairs per annum. The global average per capita consumption of footwear is 3 pairs per annum, whereas the same for developed countries in the world is more than 5 pairs per annum. The footwear industry is an important driver in the economic growth of India and is a significant segment of the leather industry. The Indian footwear market is divided into organized and unorganized segment, where the latter occupies about 65% of the overall market. In the recent past, the organized footwear sector has witnessed a faster growth and is expected to grow at 15% over the next few years.