Multibagger

Hanung Toys & Textiles Ltd

Current price – 150

Target – 400

Timeframe – 2 years

In 1990, Ashok Kumar Bansal, a qualified chartered accountant started Hanung with Rs 25 lakh borrowed from his father. He initiated a technical collaboration with Korea's Hanung Industrial Co. He also adopted the Korean company's name for a simple, practical reason. "India was not associated with quality products then," And now Hanung is India’s largest Manufacturer and Exporter of Soft Toys Decorative Cushions & Children’s Room Furnishings. Apart from these products, Hanung has recently launched a wide range of Home Furnishings in various fabrics, colors and designs.

With an area of 75,000 Sq. Feet and 426 machines, Hanung has a production capacity of 110 Lacs Pcs/Annum. Complete In-House Designing, Production, Finishing and Packing, Container Loading & Dispatch Facilities. Over Eight Thousand Designs, and growing. Clients include all big retailers in US and Europe and domestic market is growing rapidly too.

One of the biggest reasons for Hanung's success is its cost management strategy. It saves on raw material by entering into long-term contracts with suppliers. Its plants are located in tax-free and special economic zones, leading to substantial tax savings.

Entry into the home furnishing sector has augured well and the ratio has been improving towards furnishing from toys and this seems to be the next growth driver for the company. Company has forayed into home furnishing retail under the name “Splash” which If worked out well then can take Hanung by places, Even if this does not then also there is no reason not to invest in this company as we are seeing huge investment in Indian retail coming up and consumption is also growing and all these is enough to catapult hanung to the next level.

Valuations - Considering all these facts this looks like a value stock at current levels of 150 and can become the multibagger in the years to come. At 150 PE comes out to be 3.14 and does have a value. Debt is on bit higher side and that’s the reason of its fall to these levels but to me its an opportunity to buy. Management has been showing great sense of capital management for many years now and I’m sure will sail through this very well.

Concerns – In media there has been reports of promoters being involved in stock price manipulation. That’s the inherent risk associated with every small cap stock, almost every smallcap promoter does that and that’s why you see these at even PE of 3 despite exponential growth in past years.

Thanks.