Buy Kewal Kiran Clothing; target of Rs 690: Anand Rathi

Anand Rathi's research report on Kewal Kiran Clothing

Kewal Kiran’s Q3 revenue grew 27.5% y/y on Kraus’ acquisition. Standalone sales growth was muted at 0.8% y/y. Some of the revenue loss was on Lawman brand’s discontinuation from MBO channel; the brand will focus on retail channel ahead. Kraus’ Q3 sales were Rs534m, and the EBITDA margin was 19.7%. SSSG (EBO) was ~14%. 57 (net) EBOs were added in Q3, with 27 Killer and 29 Lawman EBOs. In FY26, 50-60/40-50 EBOs for Killer/Lawman, respectively, would be added. Q3 ended with inventory at Rs2.04bn, in line with historical levels. Per management, with current inventory, it can deliver double-digit growth ahead. Total debt was Rs1.1bn and cash and cash equivalents at Rs3bn. With production schedules streamlined, the company has guided to doubledigit revenue growth in Q4 and FY26. EBITDA margin to sustain at 18- 20%.

Outlook

We lower our FY25e-27e revenue 4.7% each year, led by slower growth in the standalone business. Our EBITDA estimate is 7.9% lower on avg. each year. We retain our Buy, with a 12-mth TP of Rs690 (earlier Rs803), 15x FY27e EV/EBITDA (16x FY27e EV/EBITDA).

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