Buy KPR Mill; target of Rs 815: ICICI Direct

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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ICICI Direct's research report on KPR Mill

KPR Mill is among select vertically integrated textile players in India (from yarn to garments) that has displayed consistent revenue growth and positive operating margin trajectory with strong return ratios. • It is one of India’s largest knitted garment manufacturer with total capacity of 157 million pieces (post expansion) • Over the years, it has consistently maintained ~18-20% margins with average RoCE of ~20% and D/E ratio of 0.4x.

Outlook

We like KPR as a structural long term story to play the apparel export space. Maintain BUY recommendation on the stock. We value KPR at Rs 815 i.e. 28x FY24E EPS.

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