Liberty Shoes – A Thought – At least A doubler in next 15 months even from these levels

Note: This is not the stock idea of Monday. The stock idea of Monday would be posted on Monday only πŸ™‚ .

Liberty Shoes had been consolidating for some time now, but now its looking strong, having closed above 315rs. People who want to play it safe, or people with larger portfolios i.e. people looking to invest few tens of lakhs of rupees in a stock may consider buying into liberty at these levels. The stock is good for largish portfolios as it has large enough market cap (as compared to other stocks recommended here) and very good liquidity.

The stock has lot of potential and may β€œeasily atleast double” from these levels in next 12-15 months. The estimate is based on the collaboration of what the management has guided in their interview given to CNBC after first quarter results and the news of restructuring that CNBC gave 28th Aug. For next FY, assuming they make 700cr in revenue (I know it would most likely be more, but lets take the pessimistic case), their royalty charges that they have to pay comes out to be roughly 2.5% of 700cr = 17.5 cr, which after restructuring, directly gets added to EBITA (as they no longer need to pay any royalty). Then as mentioned in that news item they would save 10% on cost of productions, that roughly comes out to be 26cr, that again adds up to the EBITA. Adding these two gives 43.5cr and assuming 30% tax gives around 30.5cr which translates into an EPS accretion of around 18rs. As on last FY, they worked on 2.7% PAT and assuming the same margin we get an EPS of around 11rs (assuming there was no re-structuring). Therefore for next year the EPS could be around 18+11 = 29rs. Given a nominal PE of around 30 one gets a price target of 29*30 = 870rs. This is very much possible, because

  1. I have taken a pessimistic approach. I believe the PAT margins would not be just 2.7%, it would improve, given the past trends (FY 13 it was 2.12% and almost same before that).
  2. For savings on cost of operations, I have assumed just 26cr. It could be much more than that. Basically I have arrived at 26cr by taking 10% of employee benefit expenses and other expenses (this is nothing but manufacturing expenses, Total administration and selling expenses). If its more than 26cr,then the EPS accretion could be way more.
  3. This is just phase 1 of restructuring, there are two more phases of re-structuring and once the market knows the bottomline is going to improve so much, the markets normally rewards the the stock with higher PE multiple.
  4. Dividends:This year the dividend distribution was 20% of net profits. Considering next year the net profits could be around 49 cr (EPS*no. of shares = 29*1.7cr). Considering again a 20% payout, they would distribute around 9.8cr in dividends and this translates into 5.5rs dividend per share. Liberty has normally been generous in the dividend payout (before it got into trouble, i.e. till 2006) paying around 25% of NP, but as usual I am taking the pessimistic approach, just to have margin of safety.
  5. There would be some cash consideration while merging the entities but that’s not thing to be big and its just one time.

Given all this, I guess this is a good level to enter liberty.

Original recommendation is here

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166 Responses to Liberty Shoes – A Thought – At least A doubler in next 15 months even from these levels

  1. Pratik says:

    Hello Aceinvestortrader,
    I would like to know about below 4 scripts
    Prime Focus,
    Ahmednagar Forging,
    PVR &

    Please suggest if you track….

  2. Salim Khan says:

    Hi how is Anil ltd for long term……heard eps to be around 105 by fy2015…for you comments plz.

  3. Jitendra says:


    Pl. give ur view on Jai Balaji Ind., & Kalpena Ind. I bought Jai Balaji 2100 shares @30.65. Kindly guide me.

  4. jayaraman says:

    Wish u and ur family a very happy onam sir. Please tell ur view on themis medicare

    • looks like it is on recovery path, but still researching it. If you have researched it, and have conviction in stock, take a call. Wish you and your family a very happy Onam….happy investing.

  5. thakral says:

    jain iregation or epc irigation…which would you recommend

  6. thakral says:

    your view on milton plastic & thomas cook

  7. thakral says:

    sorry to disturb you again…can dion global can be next blue chip..

  8. thakral says:

    shipping corp of india seems to be a turnaround bet…..wts your view..

  9. Jayaraman Pc says:

    sir what is your comment on kesar terminals and infrastructure

  10. thakral says:

    why l&t finance has not moved…in long rally…wt is future of this company

  11. Niranjan says:

    Thank you for the update. I completely agree on your views about Liberty Shoes. I am holding from 160 levels in big quantities. Would love too read more of such stock’s analysis on your blog (mcap >200 / 300cr) where the business model is more proven and one can commit big money (I personally only buy stocks where I can commit 5-10% of my portfolio capital).

    Also, do you have any views on Canfin homes?
    Thanks again!


  12. thakral says:

    is sharon bio medical ….a value buy..

  13. Kamal Saraogi says:

    Dear Sir,

    Please give your view about Camson Bio Technologies, Its from Agri Chemical sector which is in limelight along with IT, Pharma and Auto although company couldnt show promising number in Q1 because of poor mansoon.

    Will you suggest to apply for Sharda Cropchem IPO at Rs 145 to 156..

    Thanks for your time.

  14. mano3427 says:

    dont u think mirza international is a better bet than liberty, with PE just 7 against industry average of 35,posted excellent (better than liberty) result in last quarter

  15. rashmi says:

    Aimco on continuous to get in??

    • the circuit would break for sure. When the expected appreciation is huge, getting it a few percentage above recommended price is absolutely find. Also, look out for tomorrow’s pick. If not aimco, then whatever i recommend tomorrow you could think about that too.

  16. mukul sharma says:

    whats your view on ” MMTC”` t

  17. Ajinkya Mulay says:

    Hi pharma stocks have outperformed is there a long way to go? How is suven life; astec life; and unichem labs?

  18. thakral says:

    wts your view on arvind remedied..why its trading such a low price..when every pharma counter is making new high…

  19. thakral says:

    wts your view on arvind remedies.

  20. KIRTAN says:

    what u think would be the EPS OF AIMCO at end of financial year
    at present look likes 6 Rs/-
    price to earning is only 8
    then its available at very cheap valuation.

  21. pramod malav says:

    is “Tanala solution and Ybrant Digital” attractive for long term ….plzzz guide me sir ??

  22. Power says:

    Hi ace

    What do you think on Onmobile global. Could you share your email ID

  23. Dear ace,
    Peoples talking that nifty might go maximum up to 8240-8340. Then there is nearly 1000 points correction in nifty. This looks will happen up to October-November 2014.
    Aimco pesticides has increased from 5-6 to 44. Agreed also that fundamentals are improved in it.
    Now my question is if I buy aimco pesticides near 45 level, then what is effect of 1000 points nifty correction on aimco prise according to you ?

  24. vijay says:

    Iam fresher in this. I would like to invest some amount please suggest me in the following stocks for investing
    Please tell among above which is having huge potential as multi bagger as per priority among above….

  25. Srinivas says:

    Hello Sir,

    This is going to be a long query, please be patient, and any other senior members can also please provide their valuable advice.

    I am rather new to investing, i have been following stock tips from people like aceinvestor and other investors and based on by instinct i am investing in stocks( this is not the right approach, but so far i have not incurred any losses).

    I want to start investing logically rather than just following my instinct. i am diligent and can put in effort to learn new things. So can someone please point me where can i learn fundamental analysis or company valuation, please point me to some sources which will be easy for novicers like me.

    i tried going through investopedia but everything there seems abstract (most of it is going over my head).

    And what should be my approach to find new companies, where should i find these new companies to do valuation? should i just go through the list of companies listed on BSE/NSE?

    Any help will be highly appreciated.


    • join some investing forums. Take some good companies, who were doing nothing till some time back and then started flying. See, their results, annoucments, read their AR to understand what brought these kind of changes that made their stock prices fly. Analyze your findings with its competitor and that would validate your understanding.

  26. ketan says:

    Hello boss, its been a big bull run of good quality smidcap and small cap stocks since 6 months.
    which are the high conviction ideas of you apart from AIMCO, Liberty shoes, V2 and the coming monday’s stock? I want to build a portfolio of 8-10 high quality midcaps , thank you sir

  27. R SINHA says:

    Sir, What about NITIN SPINERS. Co. is reducing debt, dividend paid first time, maintaining good profit margin in last 8 quarters, capacity expanded. Govt thrust to increase textile. It is a STAR export house.

  28. thakral says:

    can we buy mirza international at these levels

  29. Asif says:

    hi…thanks for the valuable information…I wish to know your thoughts on Shilpi Cable, RS Software and Wonderla…Can you please share your views on it.

  30. Asif says:

    hi sir…can you please provide your opinion on Shilpi Cables, Wonderla and RS SOftware…

  31. Pramod Malav says:

    hiii sir i want your view on
    “mm forging, nectar lifescience, asian granito” plzzz guide me sir

  32. Hi Ace, you do look for turn around stories. Kindly share your views on suzlon which was investors darling once. thanks

  33. vivek says:

    sir, what is your view on anant raj and premeier explosives?
    pls share………

  34. deep275 says:

    Hi Aceinvestor, Do you track DAIKAFFIL CHEMICALS INDIA LTD. It is into speciality chemicals. There top line and buttom line is consistently increasing since 5 years

  35. Prabu says:

    Hi Ace,

    Any idea on why CEO of V2 retail resigned recently..

  36. Sahil says:

    Sir, what is ur view on Jai bharat maurti and cosmos films.. i am invested in that as one of my recommended it but would like to know ur opinion.. thanks

  37. Asif says:

    hi…thanks for your earlier reply….what are your views on MTNL/BSNL merger….can we buy MTNL…

  38. sir would like to know your views on aro granite, nath bio genes, force motors and sml isuza

  39. Prabu says:

    Sorry.. I had the typo error Ace.. I need your view about Lanco Infratech.. I had bought this share at 16 level and I am locked for long time.. Did you see any revival in Lanco in near future.. Whether I can hold for few more days or to book loss and enter into some other scripts..Kindly advice.

  40. Prabu says:

    I need advice from Ace before taking any decision on Lanco Infratech .. Waiting for his reply..

  41. Neel says:

    Dear Ace,
    I wanted your valuable advise on a few stocks I hold. Should I continue to hold them or make an exit.
    1. Next Media@Rs 8.71
    2. Gitanjali Gems@ Rs 82
    3. Camphor and Allied Products@Rs 211
    4. Kalpena India@Rs 90

    Thanks in Advance

  42. amit says:

    hello sir i have ranbaxy @503,should i hold it and whats ur view on ILand FS transportation network?

  43. sachi says:

    Any views on Garware Poly, if recent aggressive buying from Promoters are anything to go by…and also the fact that the company is consistently doing well….

  44. Deepa Shah says:

    Plz share ur view in Nandan Denim and Hfcl

  45. deep275 says:

    Prima plastic looks interesting. manufactures plastic durable. I understand this cannot be comapred with Nilkamal and Wimplast but can be good pick …. It is paying re1 div for a share price of 20-30 since 2010. Consistent increase is sales and profit.

    If you can take a look at it.


  46. Jitendra says:

    Dear Aceinvestortrader,

    Please give your valuable view on Shree Hari Chemical Export.
    Its Q1 EPS is Rs. 57.00 whereas previous year EPS was Rs.90.00 .
    Its PE is 1.81 whereas industry PE is @15.50.


  47. Asif says:

    Hi ace when are you gonna open the “surprise” of today….eagerly awaiting it…

  48. any thooughts on HIL.Though not a fan of birla group but company making products which are bound to get absorbed as constructions happens .

  49. saravanfbi says:

    Dear Sir,
    Please share your opinion on Force motors. Will it be another Eicher motor story?

  50. Raj says:

    Hi ace,

    Are you tracking ADF foods? What’s your opinion pls?


  51. very_common_investor says:

    if you will give stock idea having circuit more than 5% then definitely, guys like us will get it else its very disappointing… please think from our standpoint if possible

    • dont worry curcuit will open, in a day or two.Just because i put a buy at a price x does not mean that if you try to buy at few percent above it would mean its less attractive. I always give ppl example of my mistake over eicher. in end of 2008, i thought of buying eicher i think at around 180 or something but stopped because it had moved a few bucks. Then again it moved a few bucks and crossed 220. I was so convinced about the story and desperately wanted to buy but equally convinced that its a bear market and it has to come down to my price point that i did not buy. A couple of months later it was double. Even if i had bought at those double prices, i would have been sitting at a cool 30 bagger. I missed it because i was hell bent at looking at price that i want to pay and not the value i would be getting. Do not get trapped and loose out on opportunities my friend. Look at one of the answers i have given on cupid (till what price you can buy). Best of luck with your investment.

  52. Entered Liberty around 322 levels…….!! Thank u Ace.

  53. arup says:

    any idea about prima plastic-should i invest or wait

  54. anks says:

    Hello Ace,Was wondering about your thoughts on Mirza International.Thanks in Advance.

  55. rashmi says:

    hi ace,whats ur views on chandraprabhu

  56. rashmi says:

    also ur views on haldyn glass

  57. ayush says:

    sir, my friend visited the site of kesar terminals and infra in pawarkhand, it has world class logistic coming up,kmll,already sublet for warehouse…whats your view, still available at a pe of only 13 whereas other logistics are p/e of 40-90……multibagger? why markes have not discovered this gem

  58. ayush says:

    sir, also kmll will get dmerged from ktil leaving ktil a debt free entity….should be commanding a price above 1000rs

  59. ayush says:

    work on warehouse completed, railway fully complete in site, 2 warehouse already given for rent -oil, rice,soya,moong dals,channa dal…etc

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