ICICI Direct is bullish on Kewal Kiran Clothing has recommended buy rating on the stock with a target price of Rs 1500 in its research report dated May 06, 2019.
ICICI Direct's research report on Kewal Kiran Clothing
KKCL reported steady revenue growth of 10.9% YoY to YoY to Rs 133.1 crore. The topline growth was mainly derived through volume growth of 10.5% YoY to 13.8 lakh pieces. EBITDA margins declined by 120 bps YoY to 20.7% Higher cash discounts and rebates to dealers led to significant spike in selling & distribution expense (up 140% YoY to Rs 14.8 crore). However, enhanced bargaining power with fabric vendors (owing to higher volume commitments by NCS) resulted in lower input price. This translated into gross margin expansion to the tune of 620 bps YoY to 52.5%.
We model revenue CAGR of 12% over FY19-21E, with EBITDA margins expected to remain range bound at 22%. The dual strategy to revive revenue growth while maintaining balance sheet health augurs well over the long term. Hence, we upgrade our recommendation to BUY with a revised target price of Rs 1500 (18.0x FY20E EPS).
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