Buy Kewal Kiran Clothing; target of Rs 811: Anand Rathi

Anand Rathi's research report on Kewal Kiran Clothing

In line with our estimates, Kewal Kiran’s Q4 revenue grew 10% y/y, but the 19.3% EBITDA margin slightly lagged ARe. Better working capital led to higher, Rs1.4bn/1.3bn, OCF/FCF generation (FY23 Rs0.8bn/0.5bn). The company strengthened its presence in women’s wear by acquiring a 50% stake in Kraus Casuals for Rs1.7bn. Management revised its FY25 revenue growth guidance to 15-18% (15-20% earlier), excl. the recent acquisition, due to tough market conditions, with 18-20% EBITDA margins. Growth ahead would be driven by SSSG, the channel mix, network expansion and category extensions to kids’ and women’s wear.

Outlook

We lower our FY25e/26e revenue/ EBITDA ~3%/4% on average each year on the revised guidance. We haven’t factored in Kraus Casuals’ acquisition. We upgrade our rating to a Buy, with a lower 12-mth Rs811 TP (earlier Rs831), 18x FY26e EV/EBITDA.