Buy Sangam India; target Rs 64: Ajcon Global

Ajcon Global's report on Sangam (India)

"Sangam (India) enjoys close proximity to major procurement and consumption markets. Operating Profit witnessed yoy growth of 38.4 percent to Rs. 2,145 mn in FY13. EBITDA margin improved by 356 bps to 14.4 % owing to improved product mix and reduction in operating cost. The Company’s FY13 Net Profit witnessed 200 percent growth on yoy basis to Rs. 513 mn as compared to 171 mn in FY12. Topline witnessed a moderate growth of 4.34 percent to Rs. 14.7 bn in FY13. Brand promotion will play a key role in driving Company’s topline growth. It has signed bollywood star Ajay Devgan as Brand Ambassador and commenced an extensive brand campaign to promote premium range of suiting fabrics. It has forward integrated in the exports markets and is scouting for a branded partner to make a foray in branded domestic denim trouser segment."

"The management has guided for a revenue growth of 20-25% for next two years owing to 15- 17 percent volume growth and 5-7 percent through change of product mix and better realization. At the CMP, the stock is attractively priced at 3x at FY13 EPS of Rs. 13. On an average, textiles stock deserve a PE multiple of 4 times. Sangam looks very cheap (P/BV: 0.45x and PE multiple of 2.6x) as compared to Zodiac Clothing (P/BV: 1.63 x and PE multiple of 27x). We assign a P/E of 4x at FY14E annualized EPS of Rs. 16 to arrive at a target price Rs. 64 for investors with 1-2 year horizon," says Ajcon Global research report.

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