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)
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") 🌟🌟🌟
🏆🏆🏆 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.
✅ "Distribution specialist for global IT, Imaging and Lifestyle brands - The brand behind brands" ✅
📌 They provide end-to-end solutions, from market research and competition analysis for brands, to import, distribution, sales, and servicing for the brand.
📌 Robust Distribution Network - 3 Decades Old Company, 20+ Brands, 3,200 Products, 20+ Branches, 5,000+ Channel Partners across India, 150+ Employees.
📌 Company has grown constantly while keeping its margin intact over the years. Company has a 10 years CAGR of 29% in profit growth.
📌 In terms of efficiency, it has inventory turnover ratio of 7.86 and current asset turnover ratio of 6.8
✅ Sales may DOUBLE🔥🔥 in next 2 years : Expected Sales in FY22 ~ 750-800 Cr & FY23 ~ 1000 Cr Vs FY21 Sales was 509 Cr ✅
📌 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.
📌 Sales in Q1FY22 is 132 Cr👍 which represented barely 2 months of operations for the Company due to partial lockdowns in several states across India during Mar & Apr'21.
📌 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 180-200Cr👍 which is in-line with annual revenue projections.
📌 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.
✅ Brand Licensing | Market Entry Specialist for Niche Brands | Ckart ✅
📌 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 👍 from Honeywell for FY22 & approx. 200-250 Cr 👍 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.
📌 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.
📌 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.
✅ Product Segment : IT & Gaming | Imaging | Lifestyle & Security ✅
- 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
✅ Why is the Creative peripheral better than it's peer? ✅
📌 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.
📌 Key differentiating factor between Creative peripheral & above companies are - Creative peripheral has omni channel presence through - Online, Retail, General Trade.
📌 They Offers wide range of products from PC to networking and security, to grooming and lifestyle products.
📌 They have presence in digital B2B market. None of the other two players has their own digital platform.
📌 Creative is not just in distribution it is also in license manufacturing, Market entry, and penetration of Global brands.
📌 Creative is growing at higher ROCE as compared to Compauge and Redington, even with less no. partners.
📌 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.
✅ Trusted, Efficient, Committed & Visionary Management ✅
📌 Mr. Ketan Patel, Chairman & Managing Director (IIM - B Alumnus with Engineering in Computer Technology from Mumbai University) with 3 decades of experience.
📌 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.
📌 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.
this company net cash flow nagative still in uper price trg