Sharekhan's research report on KPR Mill
KPR Mills’ (KPR’s) Q4FY2024 performance was mixed with revenue declining in double-digits while EBITDA margins rose y-o-y leading to low single-digit growth in PAT. Revenue fell by 13% y-o-y to Rs. 1,697 crore. Within segments, textiles grew 2.9% y-o-y to Rs. 1,394 crore, while sugar business declined by 50.1% y-o-y to Rs. 279 crore. Lower raw material costs aided in a 541 bps and 332 bps y-o-y rise in gross margins and EBITDA margins to 38.8% and 19.7%, respectively. The textile and sugar business EBIT margins rose 236 bps and 759 bps y-o-y to 15.5% and 24.6%, respectively.
Outlook
KPR’s Q4FY2024 numbers were a mixed bag, as revenue declined in double-digits, while margin expansion led to low single-digit PAT growth. In the medium-long term, the China + 1 factor, a likely signing of the free trade agreement (FTA) with the UK and increasing opportunities in the US market, provides scope for consistent growth in its high-margin garment business (40% of the total revenue). Further, an integrated business model along with a strong capacity expansion plan in the textile businesses would aid in faster recovery for KPR, once demand improves. The stock trades at 30x/24x its FY2025E/FY2026E EPS and 20x/16x its FY2025E/FY2026E EV/EBITDA. We maintain a Buy on the stock with a revised price target (PT) of Rs. 965.
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