Buy Kewal Kiran Clothing; target of Rs 325: ICICI Direct

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ICICI Direct's research report on Kewal Kiran Clothing

KKCL is a branded apparel player with a strong bouquet of brands (owned brands ‘Killer’, ‘Lawman Pg 3’, ‘Integriti’ and ‘Easies‘) across various price points. The company’s product portfolio is primarily focused on men’s casual wear while KKCL has also entered women’s and kids wear segment. On the financial front, it has exhibited consistent double digit margins with a healthy balance sheet and strong return ratios though revenue growth has been constrained owing to the company’s policy of not resorting to excessive discounting like many of its peers. KKCL has exhibited a strong margin profile over the last decade with average margin in excess of 20%, which is better than most of its peers in the branded apparel space.

Outlook

KKCL is trading at reasonable valuations of 18x, 15x EPS of FY23, FY24E, respectively. Also, balance sheet comfort warrants we maintain our BUY rating on the stock. We value KKCL at Rs 325 i.e. 18x FY24E earnings.

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