I guess its time the company deserved its own thread. I’ve been following the Company since around May and invested at 140 levels. Brief below:-
About the Company
Creative Newtech is a distribution company that sells Samsung / GoPro / PNY and other products. They categorise them into Imaging (Zeiss, GoPro), IT (Samsung, Cooler Master) and Lifestyle (Fitness brands // Health, etc.).
Since FY 2018-19, Company has forayed into two new business segments:-
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Licensing business - They entered into an agreement with Honeywell under which they license manufacture the products for honeywell and then sell them in the markets assigned to them. Currently, they have the license to sell Honeywell Air Purifier and audio products in around 30 countries (India, SEA and Middle East).
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Online Platform business - (Grow Your Profits With Ckart) is a B2B platform like Udaan where buyers & sellers can sell to each other. The “sell” functionality was activated in 2021. Right now, most of the partners that have onboarded onto ckart are Creative’s own distribution partners. It is essentially the distribution business getting conducted through ckart.
Annual Financials
Quarterly Financials
Triggers
- Management has guided for 80 to 100cr of Honeywell licensing revenue in FY 2021-22 and have remarked in Q4FY21 con-call that this can lead to 15 to 17% EBITDA margins. Honeywell for them is 40% gross margin product in India and 50% GM in other locations.
More recently in Q1FY22 con-call, they’ve stuck to that 80 to 100cr guidance. So that leaves us with 17cr EBITDA from this business for FY22.
For FY2022-23, the management has guided for 200 to 250cr business from Honeywell. What EBITDA it can fetch considering the scale economies is everyone’s guess. But even at 15% number, it yields INR 30cr EBITDA.
- Ckart - this is a B2B platform like Indiamart and Udaan. Launched in 2020, Creative has onboarded their existing channel partners onto ckart and have also launched a “seller module” to the platform whereby the channel partners can show their own invnetory and sell to other customers on the platform.
The platform is relatively small with only 200cr worth of orders placed since inception (August 2021) and bulk of which is Creative’s own business moving to ckart but as the management says, this is their “blue ocean”. In Q1FY22 con-call, they’ve said that they are consulting with their board (which has IIM prof teaching social networks) on the right skill set and organisation structure for this business and will come to a decision in quarter’s time.
The stock is currently trading at 275 (~315cr mcap), which is approximately 10x FY22 EBITDA and 4/5x FY23 EBITDA.
Profitability in future will mainly be driven by the two new age businesses and it remains to be seen how well they can execute
I know i have missed out some info on this such as management quality - will come back to it later.
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