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Distribution specialist for global IT, Imaging and Lifestyle brands - The brand behind brands.

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Distribution specialist for global IT, Imaging and Lifestyle brands - The brand behind brands.

Stock Idea (Micro Cap Multibagger) of Aug'21 : Creative Peripherals & Distribution Ltd (NSE-BE: CREATIVE)

3C Capitals
Jul 19, 2022
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Distribution specialist for global IT, Imaging and Lifestyle brands - The brand behind brands.

3ccapitals.substack.com

Note: This stock idea was published in Aug 2021 @ 241 per share to all our PAID subscribers of Mentoring Program where we identify 10 best-in-class micro-cap multibagger stocks from micro cap segment in a year. To join WhatsApp to +91 9354179604 (Sanjay Gupta)

🌟🌟🌟 Creative Peripherals and Distribution Ltd (New Name = "Creative Newtech Limited") 🌟🌟🌟

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πŸ†πŸ†πŸ† Market Cap ~ 280 Cr | Brand behind Brands | Sales/Profit Growth (5Y): 21% & 57% | ROCE/ROE = 22.4/22.7 | PEG ~ 0.37 | Trusted, Efficient, Committed & Visionary Management.

βœ… "Distribution specialist for global IT, Imaging and Lifestyle brands - The brand behind brands" βœ…

πŸ“Œ They provide end-to-end solutions, from market research and competition analysis for brands, to import, distribution, sales, and servicing for the brand.

πŸ“Œ Robust Distribution Network - 3 Decades Old Company, 20+ Brands, 3,200 Products, 20+ Branches, 5,000+ Channel Partners across India, 150+ Employees.

πŸ“Œ Company has grown constantly while keeping its margin intact over the years. Company has a 10 years CAGR of 29% in profit growth.

πŸ“Œ In terms of efficiency, it has inventory turnover ratio of 7.86 and current asset turnover ratio of 6.8

βœ… Sales may DOUBLEπŸ”₯πŸ”₯ in next 2 years : Expected Sales in FY22 ~ 750-800 Cr & FY23 ~ 1000 Cr Vs FY21 Sales was 509 Cr βœ…

πŸ“Œ As per the management, during FY21 (Covid year) they effectively worked only for 10 months and delivered 509 Cr, they can do a run-rate of ~ 50-60Cr per month.

πŸ“Œ Sales in Q1FY22 is 132 CrπŸ‘ which represented barely 2 months of operations for the Company due to partial lockdowns in several states across India during Mar & Apr'21.

πŸ“Œ As per the management, June'21 reported one of our highest ever monthly sales, followed by a strong July'21 month. So, expect Q2FY22 revenue around 180-200CrπŸ‘ which is in-line with annual revenue projections.

πŸ“Œ Good results delivered due to strong demand for brands like Samsung, Cooler Master and PNY. Operational efficiencies and benefits from export incentives helped profit margins.

βœ… Brand Licensing | Market Entry Specialist for Niche Brands | Ckart βœ…

πŸ“Œ Brand Licensing - Licensed by Honeywell to undertake contract manufacturing for wide range of consumer & enterprise products.

- Company renewed its licensing agreement with Honeywell for another five years, expanded distribution reach to 29 countries across APAC and the Middle East.

- Through this renewed agreement with Honeywell, company expects 80 Cr to 100 Cr πŸ‘ from Honeywell for FY22 & approx. 200-250 Cr πŸ‘ in FY23, which was 26 Cr in FY21.

- Licensing business is high margin business, and Honeywell offers 40% gross margin. And for the next couple of year company has planed to have 30%-35% of business from Licensing business.

πŸ“Œ Market Entry Specialist for Niche Brands - Specialist for global brands to enter and penetrate Indian markets.

- Portfolio of over 20 world renowned brands including Honeywell, GoPro, Viewsonic and Samsung etc.

πŸ“Œ Ckart - Online digital B2B eCommerce platform - With growing digitization in industry, Ckart paves way for future-ready business model.

- Ckart is a digital platform which hosts all customers in the supply chain and enable them to transact, discover and share the products and brands to their buyers in their own company’s name.

- Company launched Ckart in Aug'20, since then till Mar'21, has added 180 Cr through Ckart.

βœ… Product Segment : IT & Gaming | Imaging | Lifestyle & Security βœ…

- IT hardware products including printer, cartridges, PC component (monitors, hard disks, CD writers, CD ROMs), and storage devices by multiple vendors.

- Honeywell: High-margin products for connectivity, which are secure and energy-efficient

- GoPro Cameras: Next-gen technology, premium pricing, target high-end users

- Lifestyle Products / Consumer Durables: Expected to rise 22% as smartphone market grows

- Gaming segment: Gaining momentum in India with adoption of high-end equipment from niche brands like Cooler Master

- Security Products: Estimated market size over $350 bn; exclusive distribution of premium brands

- Strong demand in IT brands – Samsung, Cooler Master & GoPro led to revenue growth.

- Recent additions in brands portfolio include agreements with Hyperice Inc., a US-based specialist in muscle recovery and massage products; MSi, a globally renowned name in computers; and Colorful Tech, a global brand specializing in SSDs etc

βœ… Why is the Creative peripheral better than it's peer? βœ…

πŸ“Œ Peer Companies : Ingram Micro (NY Listed Mcap = 17,500 Cr) & Redington India Ltd (Listed MCap = 13,500 Cr) are focused on IT and Mobility spaces while Compuage Infocom Ltd (Listed MCap = 191 Cr) is in PCs, Components, Peripherals, Mobility etc.

πŸ“Œ Key differentiating factor between Creative peripheral & above companies are - Creative peripheral has omni channel presence through - Online, Retail, General Trade.

πŸ“Œ They Offers wide range of products from PC to networking and security, to grooming and lifestyle products.

πŸ“Œ They have presence in digital B2B market. None of the other two players has their own digital platform.

πŸ“Œ Creative is not just in distribution it is also in license manufacturing, Market entry, and penetration of Global brands.

πŸ“Œ Creative is growing at higher ROCE as compared to Compauge and Redington, even with less no. partners.

πŸ“Œ Their cash conversion cycle is high but going ahead this will improve with credit sales come to Ckart, where selling will be in cash only.

βœ… Trusted, Efficient, Committed & Visionary Management βœ…

πŸ“Œ Mr. Ketan Patel, Chairman & Managing Director (IIM - B Alumnus with Engineering in Computer Technology from Mumbai University) with 3 decades of experience.

πŸ“Œ IPO came in Apr 2017 @75/- per share, listed at NSE SME Platform. Migrated to the main board in 2019. During last 2 months stock surged more than 100% after the new developments happening in this company started showing results.

πŸ“Œ In July 2021, preferential allotment/fully convertible warrants of 10 Lac shares @ Rs 110/- to Abhinav Capital Services Ltd and Shree Sumna Trade LLP. These firms are indirectly related to Sunil Singhania of Abakkus Fund.

🌟🌟🌟 Creative Newtech Limited is not just a distribution company, it is now into 3 businesses - distribution, contract manufacturing & B2B marketplace through Ckart. Future is very bright for this company which can generate handsome returns in the next 2-3 years. It is a MUST HAVE STOCK for our portfolio.

Creative Peripherals Stock Idea Aug 2021 3c Capitals
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Distribution specialist for global IT, Imaging and Lifestyle brands - The brand behind brands.

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1 Comment
premal
Jul 29, 2022

this company net cash flow nagative still in uper price trg

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