Recommendation from Textiles Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

KPR MILL LTD. : A WELL-DRESSED PERFORMANCE

HERE IS WHY
✓Robust financial position
✓Good returns on capital
✓employed Dominant market presence

KPR Mill is one of the largest vertically integrated apparel (from fibre to fashion) manufacturing companies in India producing yarn, knitted grey and dyed fabric. The integrated manufacturing operations enable the company to better customise the products as per client specifications and provide consistent quality assurance in a cost-effective manner. Inspired by customer delight and the desire to make innovative designs, KPR Mill creates fashion trends for men, women and children. It has 12 manufacturing units with a capacity to produce 100,000 MT of yarn per annum, 40,000 MT fabrics per annum and 115 million ready-made knitted apparel per annum, making it one of the largest garment producers in India.

The fiscal 2022 has been like no other for the company. The apparel manufacturer recorded its best ever turnover and profit after tax (PAT) in FY22. It reported net sales of ₹ 4,675 crore compared to ₹ 3,530 crore in FY21 which witnessed a strong growth of nearly 32.4 per cent. All the business segments of the company performed well during the year.

Exports have been the strong point of the company as they made up for 62 per cent of revenues in FY22. The company’s focus on exports has led to 30 per cent increase this year. The EBIDTA grew exceptionally by 50.4 per cent to ₹ 1,306 crore in FY22 as against ₹ 868.4 crore in the previous year.

The company has been strategically investing in green energy projects like wind power and co-gen power through which its power needs are self-sustained. Also, the PAT saw a jump of 63.4 per cent with an increase from ₹ 515.3 crore to ₹ 841.8 crore from FY21 to FY22, respectively. The textile business, which makes up about 83 per cent of sales, witnessed good traction. A decrease of nearly 25 per cent can be seen in the cash flows from operating activities increasing from ₹ 494 crore in FY20 to ₹ 659 crore in FY21. In Q4FY22, revenue grew by 28.16 per cent YoY to ₹ 1406.25 crore from ₹ 1097.28 crore in Q4FY21.

On a sequential basis, the top-line was up by 14.57 per cent. PBIDT excluding other income was reported at ₹ 336.07 crore, up by 25.65 per cent as compared to the year-ago period and the corresponding margin was reported at 23.18 per cent, contracting by 77 basis points YoY. PAT was reported at ₹ 219.78 crore, up by 18.06 per cent from ₹ 186.16 crore in the same quarter for the previous fiscal year. The PAT margin stood at 15.16 per cent in Q4FY22 contracting from 16.67 per cent in Q4FY21. On the returns front, the ROE and ROCE stood at 24.4 per cent and 25.5 per cent, respectively.

The stock is trading near the PE level of 22.4 times which is slightly expensive than the industry average of 20 times. It has minimal debt in the books as the debt-to-equity ratio stands at 0.28 times. In fiscal 2022, the company expanded its garment manufacturing capacity to 115 million garments per annum which has made the company the largest knitted garment manufacturer in India. In the yarn segment, it transformed traditional yarn capacity to value-added yarn that now demands premium price. Its retail business under the brand ‘FASO’, commenced in 2019, mainly sells men’s innerwear, sportswear and athleisure garments and is also gaining traction. By virtue of all these factors, we recommend our reader-investors to BUY the scrip.