Stanley Lifestyles Limited. (Subscribe) – Fintoo Blog

HighlightsIssue Size –: 14,553,508 sharesIssue Open/Close – 21 June / 25 June, 2024Price Band (Rs.)  351 – 369Issue Size (Rs.) – 5,370 mnFace Value (Rs) 2Lot Size (shares) 40Stanley Lifestyles Limited (SLL), incorporated in 2007, is the super-premium and luxury furniture brand in India and among the few home-grown super-premium and luxury consumer brands in India operating at scale in terms of manufacturing as well as retail operations.They have the distinction of being among the first few Indian companies to venture into the super-premium and luxury furniture segment and one of the few Indian companies present across various price points, i.e., the super-premium, luxury and ultra-luxury segment, through their various brands that provide a wide range of home solutions offerings, such as sofas, arm chairs, kitchen cabinets, beds, mattresses and pillows.SLL retail their furniture products under the Stanley brand. Over the years, we have developed brand recognition and customer loyalty through quality products, as well as targeted marketing strategies and advertisement campaigns such as Beautiful Living, Design Glamour, Luxury Unlimited and Bed of Dreams.The company markets and sells their products through their network of stores. Over the years, they have significantly expanded their network of stores and as of 9MFY24, they operated 38 company owned and company operated (COCO) stores all located in the major metro-cities of Bengaluru, Chennai, New Delhi, Mumbai and Hyderabad and 24 franchisee-owned and franchisee-operated or (FOFO) stores in 21 cities across 11 States and Union Territories in India.Out of the total proceeds of Rs. 5,370 mn, Rs. 901.27 mn would go towards opening of new stores by subsidiaries, Rs. 399.9 mn would go towards opening the anchor stores by subsidiaries, Rs. 100 mn would go towards renovation of the existing stores by subsidiaries, Rs. 66.6 mn would go towards funding the capital expenditure requirements for purchase of new machinery and equipment by the Company and their material subsidiary, Stanley OEM Sofas Limited and Rs. 3370 mn would go towards existing selling shareholders of the company.Key HighlightsThe boom in the real estate market in India has enabled the furniture market in India to experience a high growth trajectory. In FY21, the organised market accounted for 23 pct of the total furniture and home goods market, which increased to 26 pct by FY23. Furthermore, by FY27, the organised market is expected to contribute to 35 pct of the total market share, exhibiting an annual growth rate of 36 pct, which surpasses the growth rate of the traditional market.The company is committed to expanding their product portfolio at their stores. They have witnessed growth in their average billing size per customer at certain of stores where they have continuously expanded their product range. Their average billing size per customer (combined over the FY) has grown from Rs. 0.30 mn in FY21 to Rs 0.49 mn in FY22 and further to Rs. 0.66 mn in FY23 and was Rs 0.72 mn in 9MFY24.They aim to open stores in locations which will ensure effective penetration of their brands and products and cater to a large customer base. They factor in consumption patterns while opening a store in a particular city such as, presence of high net-worth individuals and ultra-high net-worth individuals, who previously were concentrated in metros, are now emerging in tier-I and tier-II cities nationwide, resulting in a substantial increase in luxury/super-premium expenditures.As of 9MFY24, the company has ~62 stores and the company aim to make their store count to 100-110 stores by coming 3 years, looking at 12-15 new stores every year. SLL’s Stanley Level Next store has average store size of 10,199 sq. ft., Stanley Boutique store has average store size of 6387 sq. ft., Sofas and more by Stanley store has average store size of 6,541 sq. ft.In the past SLL focused on expanding their presence in India, however, going forward, they intend to continue to increase their presence in India as well as expand their retail operations outside India including but not limited to regions in the Middle East and the South East Asia to address luxury furniture requirements of high-net worth individuals.80 pct of the business comes from the B2C segment. Due to the premiumization of airports, corporate offices and high-end hospitals, SLL witnessing a shift towards providing luxury furniture, to fulfil this demand, SLL will leverage the Stanley brand value and premium quality products to enter the B2B segment.Sales of the company have grown by ~46.29 pct CAGR during the period FY21–23, while EBITDA and profit grew ~66.68 pct CAGR and ~326.4 pct CAGR over the same period respectively. During FY23, company reported sales of Rs. 4,190 mn which increased by ~43.39 pct YoY, while EBITDA increased by 40.17 pct YoY to Rs. 827 mn as EBITDA margin fell from 20.19 pct in FY22 to 18.48 pct in FY23. As of FY23, the company reported profit of Rs. 350 mn which was up 50.9 pct YoY. During 9MFY24 the Sales/EBITDA/Profit came at Rs. 3,133 mn/Rs. 578 mn/Rs. 187 mn.Key RiskAny delay, interruption, or reduction in the supply of key raw materials such as leather and wood required to manufacture products may adversely affect SLL business, as majority of SLL’s raw material are imported.Competition in the luxury furniture market, in particular, sofas may create pressures of pricing and market share that may adversely affect SLL business.SLL’s business involves prolonged inventory days and extended cash conversion cycle. If they are unable to anticipate and respond to changes in market demands, fashion trends and customer preferences in a timely and effective manner, their business may face problems.Financial Performance and KPI’sParticularsFY21FY22FY239MFY24Sales (Rs.mn)1958292241903133EBITDA (Rs.mn)298590827578EBITDA Margin15.22%20.9%19.74%18.45%Profit (Rs.mn)19.23232350187Profit Margin0.98%7.94%8.35%5.97%ROCE5.52%12.90%16.63%8.63%ROE1.03%11.81%16.29%7.92%ValuationSLL is among the few home-grown super-premium and luxury consumer brands in India operating at scale in terms of manufacturing as well as retail operations. SLL has evolved its products over the last few years operating at a significant scale while maintaining such a high level of profitability covering the mass, luxury and ultra luxury segments. At the upper end of the price band of Rs. 369 the stock is priced at PE of ~84.4x its annualized FY24E earnings. The issue looks fully priced. However, one can apply for listing gains.Also read: Smart Ownership – An Insightful Overview of Modern Real Estate InvestmentDisclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communications cannot be held responsible for it.