CRISIL maintains Shri Lakshmi Cotsyn's fair value to Rs 136

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CRISIL maintains Shri Lakshmi Cotsyn's fair value to Rs 136

CRISIL Research has come out with its report on Shri Lakshmi Cotsyn. The research firm has maintained the fundamental grade of 2/5 to the company in its February 16, 2012 report.

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CRISIL Research has come out with its report on Shri Lakshmi Cotsyn . The research firm has maintained the fundamental grade of 2/5 to the company in its February 16, 2012 report.

Shri Lakshmi Cotsyn Ltd's (Lakshmi Cotsyn's) Q2FY12 (June year-ending) revenues and profitability were in line with CRISIL Research's expectations. The company reported a healthy y-o-y and q-o-q growth in revenues backed by demand growth in home furnishings and technical textiles. The company has undertaken ~Rs 9 bn capacity expansion, which is expected to come on stream in phases by March 2012, three months behind the original schedule. We have revised our earnings estimates to incorporate the delay in commissioning of the proposed expansion and the conversion of 1.57 mn share warrants to non-promoters, which was earlier held back due to regulatory hurdles. Given the company's high gearing and stretched working capital cycle, we maintain the fundamental grade of 2/5.

Q2FY12 (June-ending) result analysis
• Revenues grew by 10% q-o-q and 22% y-o-y to Rs 5,272 mn driven by healthy growth in the technical textiles and home furnishings segments.

• The company reported EBITDA margin of 15.2% in Q2FY12, flat q-o-q and up 200 bps y-o-y. This is on account of increased contribution from highermargin segments of terry towel and technical textiles, which together contributed 50% of domestic textile revenues in H1FY12, from 48.8% as of FY11.

• PAT grew by 17% q-o-q and dipped by 6% y-o-y to Rs 243 mn. PAT margin remained flat q-o-q at 4.6% and dipped 140 bps y-o-y due to higher interest and tax outgo.

Key developments
• As per a BSE notice dated January 31, 2012, the company has allotted shares on conversion of 3.5 mn share warrants to promoters and 2 mn share warrants to non-promoters at a price of Rs 156 per share (premium of Rs 146 per share). CRISIL Research had already factored this conversion in financial projections.

• The company has also approved the allotment of 1.57 mn share warrants to non-promoters at a price of Rs 156 per share (premium of Rs 146 per share).

Valuations: Current market price is aligned
We continue to use the discounted cash flow method to value Lakshmi Cotsyn and maintain our fair value estimate of Rs 136 per share.

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.

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