Buy Sarla Performance; target of Rs 160: Sunidhi Securities

Sunidhi Securities is bullish on Sarla Performance Fibers and has recommended buy rating on the stock with a target of Rs 160 in its August 7, 2012 research report.

“Sarla Performance Fibers, Q1FY13 sales on consolidated basis rose by 55.5% to Rs81.3 crore from Rs52.3 crore in Q1FY12. Operating profit jumped by 19.1% to Rs10.6 crore from Rs8.9 crore in Q1FY12. The Rs3.0 crore foreign exchange fluctuation loss has been booked Vs Rs16 lakh in Q1FY11. Net profit rose by 13.7% to Rs5.8 crore (Rs5.1 crore). OP and NP margins stood at 13.0% and 7.1% Vs 17.0% and 9.8% respectively in Q1FY12. Q1FY13 EPS on consolidated basis works out to Rs8.3 compared to Rs7.3 in Q1FY12. During FY12, consolidated net profit fell by 19.6% to Rs18.9 crore from Rs22.6 crore in FY11 on 21.0% higher sales of Rs233.6 crore (Rs193.0 crore). OPM and NPM for FY12 stood at 14.8% and 8.1% Vs 18.7% and 11.7% respectively in FY11. FY12 EPS on consolidated basis worked out to Rs27.0 compared to Rs32.3 in FY11. A dividend of 50% (Rs5) was maintained.”

“Incorporated in 1993, Sarla Performance Fibers (SPFL) (formerly Sarla Polyester) is a 100% EOU, manufacturing Polyester, Polyamide (Nylon) Texturised yarns & conventional/air covered Lycra/Spandex yarns. It is amongst the leading manufacturer-exporters from India, exporting products around the globe. SPFL tapped the capital market in April 2005. Sarla Overseas Holdings BV is a subsidiary of SPFL. The subsidiary company is holding 33.3% stake in Savitex, SA De CV, a joint venture and the parent company is also holding 6.7% stake in the said JV; 60% in Sarla Europe LDA, 40% in Sanitex S.A. De S.V. and 45% in Sasrla Teksil. SPFL has an installed capacity of 11, 900 tpa annum for manufacturing yarns in Silvassa and 3, 200 tpa for a Dyeing unit at Vapi. Its product range includes Polyamide 6 & 66 Textured Yarn, Polyester Textured Yarn 100% Polyester Textured Sewing Thread, Lycra / Spandex covered (Air & Conventional) with Polyamide & Polyester Yarns and Polyester & Polyamide High Tenacity Twisted Flat yarn. Its customer segments include Innerwear, Narrow Fabrics, Hosiery and Sportswear, Threads and Industrial Yarns.”

“SPFL’s new facilities in Turkey and Portugal as well as a revamped dye house in India drive volume. An increase in the proportion of nylon yarn in the total volume may boost gross spread. A tight control over cost of finance and increased income from wind energy will help offset the pressure on profitability in the coming years. At the CMP of Rs122, the share is trading at a P/E of 3.6x on FY13E and 3.1x on FY14E. We recommend BUY with a target price of Rs160 in the medium term,” says Sunidhi Securities research report.   

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