Buy Kewal Kiran; target of Rs 561: Firstcall Research

“Incorporated in 1981, Kewal Kiran Clothing Limited today is amongst the few large branded apparel manufacturers in India. The company with sales in Asia, Middle East and CIS, designs, manufactures and markets branded jeans; semi-formal and casual wear for men. The company is exposed to global standards in quality, technology, marketing and branding. The company’s strong fashion forecasting and trendsetting abilities have created brands which are vibrant, trendy and with an attitude. Each brand has been carefully crafted keeping in mind desires and attitudes of specific market segments. Each brand is an expression of its customer.”

“The trendiest collections are backed by a strong retail and distribution network. The company’s extensive reach has been built in a strategic and planned manner over the years. The success of Kewal Kiran Clothing Limited can be attributed to a great extent to its manufacturing capacity. The company has inherent core competency in manufacturing. From sourcing to finishing every aspect of the company’s manufacturing has added to its success. With 5 units, an annual capacity of 25 lakh pieces, over 800 employees, the latest technologies in jeans manufacturing, the company’s ability to innovate in manufacturing enables it to quickly go from design to market. The company has chalked out plans for growth in manufacturing capacities to meet the growing markets for its brands internationally.”

“Kewal Kiran Clothing disclosed results for the quarter ended December 2010. Net sales for the quarter moved up 63% to Rs.633.40million as compared to Rs.389.00million during the corresponding quarter last year. During the quarter, the company has reported Net Profit increased to Rs.112.70 million from Rs.63.60 million in previous year same quarter. The Basic EPS of the company stood at Rs.9.14 for the quarter ended December 2010.”

“Price to Book Value of the stock is expected to be at 2.71 x and 2.16 x respectively for FY11E and FY12E. On the basis of EV/EBITDA, the stock trades at 7.48 x for FY11E and 6.43 x for FY12E. Earning per share (EPS) of the company for the earnings for FY11E and FY12E is seen at Rs 39.57 and Rs 46.52 respectively. At the current market price of Rs 492, the stock is trading at 12.43 x FY11E and 10.58 x FY12E respectively. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 561 for medium to long term investment,” says Firstcall Research report.

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