Lovable Lingerie Ltd. (LLL), a Mumbai-based women's innerwear manufacturer, is entering capital market with a public issue on March 8, 2011. “Lovable” and “Desi Dee” are the flagship brands of the company. Lovable is amongst the top three most preferred brands in women’s innerwear in India (as per the CARE report).

Company endeavors to capitalize on its presence in the women’s innerwear category, by widening of product portfolio. Company’s aim is to strengthen their brand presence in the premium women’s innerwear segment by launching women’s innerwear in the super premium segment and also proposes to extend the “Lovable” brand into product segments like sleepwear and home wear to exploit the untapped potential in these categories.

The Company has undertaken the concessionaire retailing model as “shopin- shop” modules in LFS. This model helps LLL in displaying complete range of products thus in garnering more revenue from customers. Sales and marketing teams, who are trained on product knowledge and on fitting out the customer, operate the “shop-in-shop” modules at these stores.

Besides, they also provide in a structured manner the consumer feedback of the innerwear products which enable the company to improve existing product portfolio as well as introduce new products. The most important benefits are direct un-filtered consumer response received by our sales representative which is an immediate barometer on the consumer psyche, quick testing of new innerwear products, response before launching them in other distribution channels, accurate counter sales data, etc.

Considering the P/E valuation, the stock is priced at pre issue P/E of 15.8x on the lower end and 16.6x on the higher end of its annualized FY11 EPS of 12.33. Post issue, at the price of Rs 195 and Rs 205, the stock discounts its FY11 annualized earnings a share of 10 by 21.7x and 22.8x respectively.

Stock is priced at price to book value of of 6.5x and 6.80x on the lower and upper end respectively on its pre issue book value of Rs 0.2. On the post issue book value of Rs 77.50, P/BV will be 2.5x and 2.6x on the lower end and higher end of price band respectively. Hence, considering attractive valuations and the strong earnings growth potential, we recommend investors to subscribe this issue. We expect gain of 15%-20% on its listing.