Buy Alok Ind; target of Rs 32: Anand Rathi Securities

“Alok Industries is one of the largest textile manufacturers in the country, with widest product portfolio [from Cotton & Polyester yarn, grey, Fabric, Home textiles, Apparel fabric, to Garments] catering to host of segments. It has been catering to international markets (35% exports) as well the domestic markets (65%) with its varied product portfolio from Home textiles, Apparel fabric, Cotton and Polyester yarn to Garments.  Its international presence is spread across 70 countries contributing to the revenue of total exports. US accounts for 42.98% followed by Asia and Asian Pacific 23.97%, Europe 18.39% and South America 10.66%.”

“The diversified product portfolio helps to maximize the revenue and margins. Apparel Fabric contributes 54.06%, followed by Polyester Yarn 20.80%, Home textiles 16.75% and cotton yarn and garments contributing minutely 4.66% and 3.73% respectively.  The company is trying to strengthen its foothold domestically through its retail outlets H&A through franchise model. It is increasing H&A retail outlets to 1000 in next 2 years from around 50 now, this will boost the realizations.”

“As their expansion phase is almost complete and realizations are on upswing, so operations will show net cash surplusesfrom FY11. Management is making efforts to take care of high debt as it plans to reduce the D/E ratio below 2% from (current 2.5%) by 2012-13. It is looking to exit its property business gradually and infusing the cash in their core business.
We expect company to report, superior results for second half and we may revise upwards our earnings estimates, post Sept quarter results. Meanwhile we suggest strong buy in stock, with short term target of Rs 27 and medium term target of Rs 32. BUY,” says Anand Rathi Securities research report.

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