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BSE Code: 532820
Nirmal Bang in it’s recent research report, recommended buying of Mudra Lifestyle Limited (MLL).

State of the art process house
Fully Integrated units lead to lower lead time
as compared with the industry average
Strong brand in the domestic fabric market
Strong customer base
Can shift between products in case of
downturn in a particular category since it
manufactures garments from all kinds of

Improved focus on garment manufacturing
will result in better margins
Increase in demand for high – end fabric in
domestic market
Catering to top‐end brands should lead to
improved margins
Expansion of customer base in international
Company can launch its own brand in the


Longer Working Capital Cycle: the company requires huge investment which leads to the longer working capital cycle which we believe is negative for the company and our assumptions.
Competitive & Fragmented Industry: A major gap in Indian textile industry is its fragmented industry structure with a dominance of small scale industries. The regional unorganized player is becoming competitive in the current scenario which we feel pose a threat to the company.
Foreign Currency Risk: Appreciation of India Rupee vis‐à‐vis USD, Euro and GBP would weaken the competitive position as the company accounts for
around 15% of its total revenue from exports. Apart from that the strong rupee make imported fabric / garment more cheaper and can put pressure on realization

Nirmal Bang’s recommendation

We feel Mudra Lifestyle will see volume growth on account of increase in capacity and margin expansion on account of better product mix and leveraging of fixed cost during FY11E. The benefit of this increase in margin is already visible in Q2 and Q3FY10 result which has happened on account of commencement of new process house.
We expect company to report EPS of Rs. 4.2 and 8.7 for FY10E and FY11E respectively. At current price of Rs. 46, the stock is trading at a PE of 11x and 5.3x
and P/BV of 0.9x and 0.8x for FY10E and FY11E respectively. The valuation looks attractive and we recommend a “BUY” on the stock with a target price of Rs. 65 per share (PE of 7.5x for FY11E), an upside of 41%.

I recommend this stock for investors who have one to two years investment horizon.

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