CRISIL assigns fair value of Rs 672 to Kewal Kiran Clothing

1236 Investors following Kewal Kiran. Share this News with them.

0

Like this story, share it with millions of investors on M3

CRISIL assigns fair value of Rs 672 to Kewal Kiran Clothing

CRISIL Research has come out with its report on Kewal Kiran Clothing. The research firm has maintained the fundamental grade of 4/5 to the company, in its January 23, 2012 report.

Post your opinion here

 

0

Tweet

Share on Tumblr

Kewal Kiran BSE | NSE 31/05/12 Are Mutual Funds betting on Kewal Kiran?

CRISIL Research has come out with its report on Kewal Kiran Clothing . The research firm has maintained the fundamental grade of 4/5 to the company, in its January 23, 2012 report.

Kewal Kiran Clothing's (Kewal Kiran's) Q3FY12 revenues and profitability were below CRISIL Research's expectations. Revenues remained flat y-o-y owing to an early Diwali festival in 2011 (sales factored in Q2FY12) and overall slowdown in consumer spending. EBITDA margin dipped 850 bps y-o-y to 18.6% on account of slower sales growth and higher denim fabric costs. We will be lowering our estimates post interaction with the management.

 Although our outlook for the rest of FY12 will likely remain cautious given macroeconomic headwinds, we maintain our fundamental grade of 4/5 given Kewal Kiran's established brand profile and strong balance sheet strength.

Q3FY12 result analysis
• Revenues remained flat y-o-y at Rs 646 mn (36% de-growth q-o-q). Apparel sales volume dropped 9.2% y-o-y, while realisations increased 10.6%. The drop in sales volumes can be attributed to an early Diwali season which pushed back most of the festive sales to September 2011 (Q2FY12). Accordingly, the company posted revenues of Rs 358 mn in September 2011 as compared to Rs 246 mn in September 2010 and Rs 245 mn in October 2011 as compared to Rs 340 mn in October 2010. The overall slowdown in consumer spending further aggravated the revenue growth potential. The accessories segment clocked revenues of Rs 36.8 mn in Q3FY12 as compared to Rs 65 mn in Q2FY12.

• EBITDA margin declined by 850 bps y-o-y to 18.6% in Q3FY12 on account of lower sales growth and higher raw material expenses which increased to 46% of revenues from 38% in Q3FY11.

• The company reported PAT of Rs 88 mn against Rs 113 mn in Q3FY11. Higher other income of Rs 30 mn in Q3FY12 (Kewal Kiran has surplus cash balance of Rs 1 bn as of Q3FY12) helped the company restrict its PAT margin dip at 420 bps to 13.5%. Accordingly, EPS was Rs 7.1 vis-à-vis Rs 9.1 in Q3FY11.

Key development
It opened 10 new K-Lounge stores, seven Killer exclusive brand outlets (EBOs), seven Integrity EBOs and two Lawman Pg3 stores. It closed down 10 unprofitable stores during the quarter. As of Q3FY12, the company has 262 stores, of which 23 stores are in the work-in-progress stage.

Valuation: Current market price is aligned
We continue to use the discounted cash flow method to value Kewal Kiran and maintain our fair value of Rs 672 per share. Our fair value implies a P/E multiple of 11.9x FY13E EPS of Rs 56.6.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"