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To: rajesh@sarayamystair.in
From: Himanshu Pareek <himanshu.pareek@mnclgroup.com>
Reply-To: Himanshu Pareek <himanshu.pareek@mnclgroup.com>
Subject: =?UTF-8?Q?Linc_Limited_=E2=80=93_Initiating_Coverage_=E2=80=93_Monarch_Ne?=
 =?UTF-8?Q?tworth_Capital_Limited?=
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Date: Thu, 19 Oct 2023 11:14:23 +0530

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Hello,

We at Monarch Networth Capital Limited, initiated coverage on Linc Ltd
with a TP of Rs1050, an upside of ~24%. This well-established, four
decades-old writing instruments brand with a meaningful market share
is in the throes of a major transformation. Its active premiumization
initiative by introducing the Pentonic brand in 2019 is already
reflecting in higher revenues and a rapidly rising margin trajectory,
vital in a sector plagued by low price points and a large unorganized
segment. Likewise, the company's concerted efforts to enhance its
distribution network in traditionally weaker
markets is accelerating growth. To top it, a debt-free, free cash
generating machine with impressively rising return ratios is capable
of delivering further re-rating.

Growing importance of Pentonic:   The launch of the premium Pentonic
brand has already proved to be a game-changer. Pentonic's unique
design and exceptional quality instantly made it a hit, leading to a
significant increase in its contribution from 7% in FY19 to 29.3% in
FY23. Pentonic also delivers high margins, which improved from 7% to
12.6% in FY23, thanks to the higher realization it commands. We
anticipate further growth in Pentonic’s contribution on back of the
increased penetration and new product launches, directly feeding into
margin expansion.

Rapidly increasing distribution network: Linc’s hitherto heavy
reliance on the eastern market (low purchasing power => dominance of
the Rs 5 category constituting 67% of revenue) is slated to undergo
meaningful positive change. With advice from a reputed consultant, the
company has driven a 100,000 retailer increase over the last three
years, and more is to come. This move also included expanding its
presence in the western and southern markets, reducing its dependence
on the eastern market and hence overall better unit economics. The
company aims to double its
distribution presence in the next two years.

Taking competition head-on: The company’s long-standing competitive
disadvantage, despite being a pioneer, is ready to reverse, with a
renewed focus on higher ASP products, rising retail reach, and
increased presence in richer territories – all areas where it has
been hitherto deficient. Moreover, initiatives to transition from a
pen-centric company to a major player in the stationery sector by
adding several stationery products should bolster growth prospects, as
well as enhance its image.

Valuation: At a current price of Rs 848, the stock is trading at 21.5x
FY25E and 17.3x FY26E our earnings estimate. We value the Company at
25x Q1FY26E earnings estimate of Rs 42, arriving at our target price
of Rs.1050, an upside of c.24% from current levels. We believe that
the attributed multiple is amply justified by the rapid sales CAGR,
rising margins and return ratios. With a simplified corporate
structure, sharp management focus on the business compared with
competitors and accelerating growth, there could be further re-rating.
Key risk is volatility in polymer prices, the key
raw material, as it is linked to crude oil.

Detailed Report- http://lnk.mnclgroup.com/vtrack?clientid=180810&ul=
CAcCBAYBHVNLS1QOVkAKc0sER1ROWVodEkRSDEAWW1YdHQ==&ml=CUgETQEBHQ==&sl=ckh3TWZlHTB6bUkIXVhMXlYGWVJFV0IUT1NcCE4I&pp=0&fl=WEBAQUAMTkxVUEFKX0pNf3ErdllDXA==&ext=

Disclaimer:  http://lnk.mnclgroup.com/vtrack?clientid=180810&ul=
CAcCBAYBHVNLS1QOVkAKc0sER1ROWVodEkRSDEAWW1YdHQ==&ml=CUgETQEOHQ==&sl=ckh3TWZlHTB6bUkIXVhMXlYGWVJFV0IUT1NcCE4I&pp=0&fl=WEBAQUAMTkxVUEFKX0pNAAEBUEdTQg==&ext=

Regards,
Himanshu Pareek
Assistant Vice President – Investment Banking
Monarch Networth Capital Limited
4th Floor, B Wing, Laxmi Towers, G Block,
Bandra Kurla Complex, Bandra (E), Mumbai – 400051

Email: himanshu.pareek@mnclgroup.com
<mailto:himanshu.pareek@mnclgroup.com>

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font-family:Arial,'Helvetica Neue',Helvetica,sans-serif;mso-line-height-alt:16.8px;color:#000;line-height:1.2"><p style="margin:0;mso-line-height-alt:16.8px"><strong>Hello,</strong></p><p style="margin:0;mso-line-height-alt:16.8px"><strong>&nbsp;</strong></p><p 
style="margin:0;text-align:justify;mso-line-height-alt:16.8px">
<strong>We at Monarch Networth Capital Limited, initiated coverage on Linc Ltd with a TP of Rs1050, an upside of ~24%. This well-established, four decades-old writing instruments brand with a meaningful market share is in the throes of a major transformation. Its active premiumization initiative by introducing the Pentonic brand in 2019 is already reflecting in higher revenues and a rapidly rising margin trajectory, vital in a sector plagued by low price points and a large unorganized segment. Likewise, the company's concerted efforts to enhance its distribution network in traditionally weaker
markets is accelerating growth. To top it, a debt-free, free cash generating machine with impressively rising return ratios is capable of delivering further re-rating.</strong>
</p><ul style="line-height:1.2;mso-line-height-alt:16.8px"><li style="text-align:justify">
<strong>Growing importance of Pentonic: &nbsp;</strong> The launch of the premium Pentonic brand has already proved to be a game-changer. Pentonic's unique design and exceptional quality instantly made it a hit, leading to a significant increase in its contribution from 7% in FY19 to 29.3% in FY23. Pentonic also delivers high margins, which improved from 7% to 12.6% in FY23, thanks to the higher realization it commands. We anticipate further growth in Pentonic&rsquo;s contribution on back of the increased penetration and new product launches, directly feeding into margin expansion.&nbsp;
<br>&nbsp;</li><li style="text-align:justify">
<strong>Rapidly increasing distribution network:</strong> Linc&rsquo;s hitherto heavy reliance on the eastern market (low purchasing power =&gt; dominance of the Rs 5 category constituting 67% of revenue) is slated to undergo meaningful positive change. With advice from a reputed consultant, the company has driven a 100,000 retailer increase over the last three years, and more is to come. This move also included expanding its presence in the western and southern markets, reducing its dependence on the eastern market and hence overall better unit economics. The company aims to double its
distribution presence in the next two years.
<br>&nbsp;</li><li style="text-align:justify">
<strong>Taking competition head-on:</strong> The company&rsquo;s long-standing competitive disadvantage, despite being a pioneer, is ready to reverse, with a renewed focus on higher ASP products, rising retail reach, and increased presence in richer territories &ndash; all areas where it has been hitherto deficient. Moreover, initiatives to transition from a pen-centric company to a major player in the stationery sector by adding several stationery products should bolster growth prospects, as well as enhance its image.
</li></ul><p style="margin:0;font-size:14px;text-align:justify;mso-line-height-alt:16.8px">
<strong>Valuation: At a current price of Rs 848, the stock is trading at 21.5x FY25E and 17.3x FY26E our earnings estimate. We value the Company at 25x Q1FY26E earnings estimate of Rs 42, arriving at our target price of Rs.1050, an upside of c.24% from current levels. We believe that the attributed multiple is amply justified by the rapid sales CAGR, rising margins and return ratios. With a simplified corporate structure, sharp management focus on the business compared with competitors and accelerating growth, there could be further re-rating. Key risk is volatility in polymer prices, the key
raw material, as it is linked to crude oil.</strong>
</p><p style="margin:0;font-size:14px;mso-line-height-alt:16.8px">&nbsp;</p><p style="margin:0;mso-line-height-alt:16.8px">Detailed Report- <a href="http://lnk.mnclgroup.com/vtrack?clientid=180810&ul=
CAcCBAYBHVNLS1QOVkAKc0sER1ROWVodEkRSDEAWW1YdHQ==&ml=CUgETQEBHQ==&sl=ckh3TWZlHTB6bUkIXVhMXlYGWVJFV0IUT1NcCE4I&pp=0&fl=WEBAQUAMTkxVUEFKX0pNf3ErdllDXA==&ext="  style="text-decoration: underline; color: #0068A5;">https://bit.ly/LINCltd</a><br><br>Disclaimer: &nbsp;<a href="http://lnk.mnclgroup.com/vtrack?clientid=180810&ul=
CAcCBAYBHVNLS1QOVkAKc0sER1ROWVodEkRSDEAWW1YdHQ==&ml=CUgETQEOHQ==&sl=ckh3TWZlHTB6bUkIXVhMXlYGWVJFV0IUT1NcCE4I&pp=0&fl=WEBAQUAMTkxVUEFKX0pNAAEBUEdTQg==&ext="  style="text-decoration: underline; color: #0068A5;">https://bit.ly/39derdz</a></p><p style="margin:0;mso-line-height-alt:16.8px">
&nbsp;</p><p style="margin:0;mso-line-height-alt:16.8px"><strong>Regards,<br>Himanshu Pareek</strong><br>Assistant Vice President &ndash; Investment Banking<br><strong>Monarch Networth Capital Limited</strong><br>4th Floor, B Wing, Laxmi Towers, G Block,<br>Bandra Kurla Complex, Bandra (E), Mumbai &ndash; 400051</p><p style="margin:0;mso-line-height-alt:16.8px">
Email: <a href="mailto:himanshu.pareek@mnclgroup.com" style="text-decoration: underline; color: #0068A5;">himanshu.pareek@mnclgroup.com</a></p></div></div></td></tr></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table><br/><div><p style='font-size: 12px;line-height: normal;font-family: arial;text-align: center;' >--<br><a href="http://lnk.mnclgroup.com/vtrack?clientid=180810&ul=
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