Monday, January 25, 2010


Company Description: Incorporated in 1980, Superhouse manufactures and sells finishing leather products like footwear, uppers and sports shoes, leather garments, bags, wallets and other leather goods. A US $ 50 million, Superhouse Group has 15 units, with workforce of over 5000 and has its presence in over 35 countries. The textile division contributes nearly 10% in the revenue. The company is having 6 subsidiary companies namely Superhouse (UK), Superhouse (USA) International Inc, Superhouse Middle East FZC, Superhouse R.O. S.R.L., Super House Canada Inc and Super House HK.

Until now, its‘ Allen Cooper’ brand had been enjoying the prestigious patronage of British and European markets. The brand has now stepped into the Indian market and is catering to the requirements of corporate and institutional customers, creating a niche image for its fashion leather products adhering to the high standards that the British have set, Double Duty is a brand owned by Superhouse for marketing safety footwear and garments mainly to Gulf and European countries.

Investment Rationale: Three state-of-art units involved in manufacturing of footwear are ably backed by its three marketing subsidiaries strategically located in USA, UK, UAE & Australia. To add on, it has approved vendors to world-wide brands such as Wal-Mart, Filanto, Auchan, Andre, Shoe Fayre, Hudson Bay, Heckel Securite, Secura and many more. Its in-house tanneries sole division provides finest quality leather soles for foot wears. To meet the exacting demand of clients it also imports leather from Brazil, Italy and Columbia. Superhouse derives nearly 85% of its revenue through exports. Its products are exported to countries like France, Germany, Holland, Australia and South Africa.

During FY07-08, SL spent Rs 40 crore towards expansion to cater exclusively to the US and European markets. SL’s existence for over three decades allows offering its customers the maximum in choice, value & quality. The prospects of the leather industry are so bright that the exports from the country are expected to touch $ 7 billion by 2011-12 from $ 3.6 billion at present. India has around 3% share in the global trade in leather compared to China's 20%. Realizing the growth potential of the leather industry, which occupies a prominent place in the Indian economy, the Government of India has been making significant efforts to promote rapid advancement of the industry.

The government’s measures to offer a slew of incentives for opening of the leather sector to foreign direct investment (FDI) are expected to spur the growth in this sector. The Government has also provided assistance worth 2% of the value of exports to the US and the European Union in the form of duty-free scrips that could be sold for cash.

The stock is forming a rounding bottom price pattern in its weekly chart. Volumes are also in confirmation with the price pattern as they are decreasing then reduced substantially and finally increasing during the formation of the price pattern. The stock is expected to touch Rs 84, which was the level from where the big fall began. At the CMP of Rs 60, the share is trading at a P/E of 4.3x on FY10E and 3.5x on FY11E. We recommend BUY with a target price of Rs 85 in the medium term.

To read the full report:SUPERHOUSE LIMITED