Business Analysis 23: Bella Casa Fashion & Retail Ltd
If one has to play premiumization in India, then Bella Casa is a great proxy play from the branded fashion retail industry
If one has to play premiumization in India, then Bella Casa is a great proxy play from the branded fashion retail industry. As we all know how this premiumization craze has recently taken off.
It's a leading B2B apparel player with 8000+ retail touch points, 5 manufacturing plants, 2 crs pcs per annum, 3000+ highly skilled professionals, 1500+ distributors. They are an original design manufacturer (ODM) which distinguishes it from plain vanilla contract manufacturers.
What's more interesting is its continuous profitable scaling over the last 12 years. Let's dig deeper into the business.
There are two different segments. Apparel contributes majority of their revenue with 75% of share and the rest 25% comes from home furnishing as of FY24. Their clients include some prominent names such as Zudio, Baazar Kolkata, Pantaloons, Reliance Smart, Trent, DMart, Amazon, Myntra, Meesho, VMart, Flipkart and many more. Such clients show their excellent work they have done over the years.
Apparel segment is growing much faster than the home furnishing business. It includes women's wear, men's wear, and kid's wear. Home furnishing products are bed sheet, bed cover, Dohar, comforter, cushion cover, customized gift etc.
They have recently ventured into men's ethnic and casual shirts, kid's casual and ethnic wear. Also, with this product expansion they are launching 2 new facilities and expanding 2 existing ones as there's huge demand.
Some Industry Numbers
1. Global apparel market growing from $1.36 trn in 2024 to $1.78 trn by 2029 at 4.63% CAGR
2. Indian textile and apparel market growing from $172.3 bn in 2022 to $387.3 bn in 2028 at 14.59% CAGR
3. Indian home textile market growing from $9.60 bn in 2024 to $15.36 bn by 2029 at 9.84% CAGR
4. Total apparel expenditure projected to hit 10.68 lakh cre by 2027
Valuation
From valuation perspective, the business is trading at 41 PE. It's too expensive for an apparel or textile company. It's expensive as compared to its peers as well. They have been constantly growing their business, of course, with ups and downs in some years. If they can show 20% growth over the next 3 years, then PE would be 20 in terms of current market cap. Moderate, right? But still not cheap. Remember it's a long term game. Some previous years have seen drawdowns yet they ultimately grew. So, if the stock goes down from here, it could be a good buying opportunity. This stock may give you double or thrice returns within 3 years but in any economic slow down or supply chain issues, such stocks react faster than their topline decline.
Either you have to hold it for a long time or you have to sell it in bull market to make good profits. They have strengthened their relationship with clients over the years. Their base is now stronger than before. Their capacity is increasing continuously. Management is executing properly. There's huge tailwind for the branded fashion retail industry. The business is scaling well. They are giving dividends. Debt is okay to repay. Positive OCF. Recent fundraise in Nov 2024 through rights issue priced at RS 261. All these factors suggest that Bella Casa might be a good business to bet on for long term. Buying or selling just based on mere cash flow won't be a good idea here or for any stock. One needs to consider several factors.
Thanks for reading
Take care
Rabi
Disclaimer: I'm not SEBI registered. This content is for educational purposes only. Do your own diligence.