KPR Mills Ltd. is a mid-cap company in the textile industry with a market valuation of 19,309.07 Crore The company’s diversified business spotlight includes White Crystal Sugar, Yarns, Fabrics and Garments. The firm produces a wide range of textile products including compact, melange, carded, polyester, and combed yarns, readymade knitted apparel, fabrics, and readymade knitted apparel. Shares of KPR Mills Ltd ended trading on NSE on Friday 564.50 per share, up 0.0089 per cent from the previous close. At current prices, the stock is trading 26.59 per cent down from its 52-week high and 70.94 per cent up from its 52-week low on NSE, where it hit a 52-week high. 769.00 and 52-week low of 14-Jan-2022 330.23 on 23-August-2021. Edelweiss Broking Limited has placed a Buy Call on KPR Mill stock with a target price of Rs 860 which would be a new or all-time high. From the current market price of the stock, the stock has a potential gain of 52.34 per cent to achieve its target price.
The brokerage firm said in a note that “KPR Mills revenue grew by 75.4% (on a lower basis) and 9% QoQ to Rs 1,585 crore (11% over our estimate) on a year-on-year basis, leading to strong growth across sectors.” Hui. Textile segment grew by ~63% to Rs 1,276 crore, while sugar segment revenue grew ~2.5x to Rs 284 crore. Within Textiles, Garment grew 83% YoY (16% QoQ) to INR692cr, led by new garment facility and higher realization, while Yarn & Fabric segment grew at a relatively slower pace from 42% YoY (-6% QoQ) became INR541 Crore. Gross margin contracted 40 bps QoQ at 40.5% due to higher usage cotton prices and freight cost. However, tighter control over operating costs led to a 15% reduction in EBITDA (our estimate of INR368cr vs INR321cr). Thus, EBITDA margin was flat at 23.2% sequentially. Due to higher depreciation, interest cost and taxes, PAT was just 5% higher than our estimate by INR227cr (35% YoY and 4% QoQ).”
“Garment segment volume stood at 36.7 million pieces, up 28% year-on-year: (a) 42 million pieces in November 21 (total capacity 157 million pieces) and (b) commissioning of new apparel facility with strong demand for apparel Export market with the opening up of the economy. With a 3-fold increase in cotton prices and a 4-fold increase in freight cost, KPR has hiked prices, resulting in an increase of INR 190/piece in realization of 39% YoY (20% QoQ). Over the past two years, KPR’s average apparel realization has grown by ~50%, driven by aggressive price increases and improved product mix. Edelweiss Broking Ltd said, We expect the Garment segment to continue its outperformance and deliver 14% growth in FY22-24, a volume growth of 12% despite expected slowdown in export markets in H2FY22 Will be
“KPR commissioned 10,000 TCD sugar and 230 KLPD ethanol capacity during the quarter, taking the total capacity to 20,000 TCD sugar and 360 KLPD ethanol. The first quarter is usually a seasonally weak quarter for Chinese companies, however, with this capacity addition, sugar/ethanol revenue grew by more than 1.5 times and 27% QoQ to INR284 Cr. At maximum utilization, the sugar/ethanol plant will generate ~INR1,400 crore annual revenue (50:50 sugar/ethanol blend). KPR expects the new sugar/ethanol facility to reach critical capacity by the end of FY23. As ethanol is a high-margin segment, we expect the company’s operating margin to improve by 260 bps to 25.5% in FY 2012-24. Backed by strong sugar exports and higher ethanol contracts from the government, we anticipate revenue from the sugar/ethanol facility. To reach ~50% revenue CAGR to Rs 1,430 crore in FY 22-24,” the brokerage said.
“While we expect KPR Mills to post strong numbers in Q2FY23 as well, given the warning of profit by global retailers amid concerns of US slowdown at the end of the year, we believe that garment exporters will be able to sell more in H2FY23. You may see contraction in your order book. Moreover, contraction in realizations of the textiles segment to pass on the recent fall in cotton prices (and further fall expected), will hamper revenue growth in textiles in H2FY23. Nevertheless, we believe that the textile export theme here is driven by (a) the adoption of the China Plus 1 strategy by global retailers, (b) the high likelihood of India signing FTA agreements with Europe and the UK, (c) Gaining market share of India from other competing countries (Sri Lanka and Pakistan) and (d) adding new geographic regions (Australia, Dubai, Japan and Latin America). Keeping in view the expected slowdown in H2FY23, we have lowered our earnings estimates for FY23E and FY24E by 6% and 5% respectively. We maintain a ‘Buy’ rating on KPR Mill with a revised target price of INR860/Share (Last TP: INR900/Share), which is valued at 26x FY24E earnings, said Research Analysts at Edelweiss Broking Ltd.
The stock has given a multibagger return of 421 percent in the last three years, and a multibagger return of 268.71 percent in the last five years. The stock has dropped 19.90 percent YTD so far in 2022, but has gained 47.04 percent in the past 12 months. at the current market price of 564.50 stock is trading below 5 day, 10 day and 100 day EMA and above 20 day, 50 day and 200 day Exponential Moving Average (EMA).
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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