Nilkamal reports 53% growth in revenues in Q3

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Nilkamal Ltd reported robust revenue growth of 54% at Rs1.88bn in Q3FY08. Revenues grew on the back of a 53% growth in the plastics business and 65% growth in the lifestyle furniture segment (@ home). EBITDA for the quarter was at Rs196m. The company reported a one-time exceptional item of Rs464m from the sale of investments in its subsidiary Nilkamal Bhoomi Developers Private Limited, resulting in a PAT at Rs 405m. On a like-to-like basis PAT grew 360% at Rs47m. Nilkamal continues to dominate the moulded plastic furniture segment (28% market share) as well as crates & bins (41% market share). The company continues to add new growth levers and has made a successful foray in the lifestyle furniture space under the '@ home' brand (65% growth yoy in Q3FY08).

 

The company has successfully launched 10 '@ home' stores and plans to open 50 stores by the FY10. Additionally, the company has identified material handling services as a growth area and has entered into a 50:50 JV with BITO Lagertechnik GmbH of Germany to provide state-of-the-art material handling services. With a dominant share of the plastics business, strong growth in lifestyle retail - on the back of changing lifestyles and growing consumerization - and first mover advantage in the material handling business, we expect Nilkamal to post a 40% revenue CAGR over FY07-10. With the stock currently trading at 6.4x FY10 earnings, we reiterate our out-performer rating with a target price of Rs470, an upside of 60%.

 

KEY HIGHLIGHTS OF Q3FY08 RESULTS

 

• Nilkamal reported a 53% growth in revenues of Rs1.88bn in Q3FY08 and EBITDA of Rs196m. 
• The company reported a one-time exceptional item of Rs464m from the sale of investments in its subsidiary Nilkamal Bhoomi Developers Private Limited, resulting in a PAT at Rs 405m. 
• On a like-to-like basis, PAT grew by 360% to Rs47m 
• The core operations of plastics (moulded furniture and crates & bins) reported a 53% increase at Rs1.7bn. 
• The lifestyle furniture segment - "@home" continued its strong growth momentum and reported a 65% growth in revenues to Rs146m. 
• The contribution from the other business segments like Nilkamal Crates & Bins and Stackwell Marketing Services came at Rs 40m. 

Revenue contribution

Revenues Q3FY08 Q3FY07 Change (%)

 

Plastics 1,743 1,138 53

Lifestyle furniture 146 88 65

Less inter-segment revenue 3.6 -

Total Revenues 1,885 1,226 54 

 

@home - growth momentum continues

 

During the quarter the company added 1 more "@home" store, taking the total to 10 and plans to open another 4 stores in FY08, ending the year at 14 stores. The company plans to add a further 35 stores by FY10 taking the total number of stores to 50. Having identified the growth opportunity in the lifestyle furniture space, the company plans to cash in on this potential opportunity by offering products and services on the lines of IKEA's model, where high-end home furniture is available at affordable prices. In line with the growth in store count, the revenues from '@ home' have also shown consistent growth. With the planned ramp up in the number of stores, we expect Nilkamal to report a 135% CAGR in revenues over FY07-10.

 

@ home store count @ home revenues

 

Nilkamal currently sources the furniture from the Far East and customers walking into @home stores can also avail of complementary interior design services and consultancy from interiors experts (available in-store). The company continues to grow revenues both on a yoy basis and we believe that the growth traction from the lifestyle furniture business will continue.

 

Material Handling Business - capitalizing on expertise

 

Nilkamal has entered into a 50:50 JV with BITO Lagertechnik of Germany, called Nilkamal BITO to provide state-of the- art material handling services and commercial production has started at the company's Jammu plant. We expect strong growth in this sector on the back of a buoyant economy and sustainable growth in manufacturing and other services like organized retail, warehousing and logistics. We expect Nilkamal BITO to report a revenue CAGR of 52% over FY07-10 in this segment. The organized material handling services is a nascent industry and we believe Nilkamal will capture first-mover advantage in this sector.

 

Valuations & view

 

With a dominant share of the plastics business, strong growth in lifestyle retail - on the back of changing lifestyles and growing consumerization - and first mover advantage in the material handling business, we expect Nilkamal to post a 40% revenue CAGR over FY07-10. We expect profits to grow exponentially going forward as the lifestyle furniture starts contributing to the top-line. With the stock currently trading at 6.4x FY10 earnings, we reiterate our outperformed rating with a target price of Rs470, an upside of 60%.

 

Sourced From: ICPAR