Mirza Tanners is expected to report a net profit of Rs 8.5 crore on sales of Rs 52 crore for the first-half ended September 30, 1999. This means that the current market price is discounted just 13.4 times by the annualised eanings. Better still, the second-half is usuaaly better for the company, so you can look forward to even better earnings.

The company sells its shoes in most European countries under the brand names `Oakridge' and `Red Tape'. Red Tape is well established in Europe, Australia and South Africa. In Europe, the company routes its sales through UK-based MCF Trading, in which it holds a 45 per cent stake. To capture a sizable share of the African market, the company sells its products under the Ozark brand, through a trading outfit in South Africa.

The company has recently bought 90 per cent equity stake in its new subsidiary - MTL Trading (Pty) Ltd - set up in Africa for developing local designs and increasing exports to that country. Mirza Tanners also has a presence in the Hong Kong market where it sells its shoes through a prestigious retail chain.

The company has a substantial amount of export orders in hand which should give a big boost to its bottomline. With the rupee expected to depreciate in the near future, the company will be major beneficiary. Export income accounts for around 84 per cent of total income.

Mirza Tanners' net profit has been growing at an average compounded annual growth of 44 per cent for the last five years. For the first three months of the current fiscal the company reported a net profit of Rs 3.59 crore on a turnover of Rs 24.32 crore.

The main advantage that Mirza Tanners enjoys over its competitors is its in-house tannery. This helps the company maintain the quality of leather (better the quality of the leather, higher are profit margins). For this reason alone ,the company was able to make in-roads in the quality concious European market.

The company has two plants in Uttar Pradesh. The company's third plant at Noida, which was set up at a cost of Rs 18 crore, commenced commercial production in March, 1999. The factory has the capacity to manufacture one million pairs of polyurethane shoes per annum. The new plant will help the company clock higher growth in the current fiscal. It is expected to attain capacity utilisation level of 90 per cent by March, 2000.

The company has also drwan up expansion plans. The Rs 12 crore plan includes modernisation and expansion of its tannery at Magarwara, Kanpur, setting up of a captive power plant and a new shoe upper factory with a capacity of 4.5 lakh pairs per annum at Unnao, Kanpur. To fund this, Mirza Tanners is issuing preference shares aggregating Rs 10 crore.

This expansion plan is likely to improve the company's growth prospects over the medium to long term. In the near future, it plans to commence production for children's casual shoes, and later it has plans to make a foray into uniform shoes.

As part of its future growth, it plans to make its presence felt in the industrial and speciality footwear segment. Taking in account all the above factors, the scrip holds potential to double in two-year's time frame.