Sunidhi Securities' report on Nandan Denim
NDL is engaged in manufacturing of denims, gray cotton fabrics and khakhis. It also manufactures fabrics of different weaves, dyes, combination of yarns and weights. Currently, the exports account for nearly 10% of sales. NDL is the largest denim suppliers to global brands such as Carrefour, Ralph & Lawen, Polo, A/X, Tomy Hilfiger, Gini & Jony, CP Colorplus, Mufti, Killer, Spykar etc.
NDL is a part of a leading conglomerate, Chiripal Group, which was established in 1972 and is currently diversified across several businesses like Textiles, Petrochemicals, Chemicals, Packaging, Infrastructure and Education. Chiripal group is widely recognized as the Textile House with manufacturing facilities for POY, Texturising, Cotton Spinning, Denim Weaving, Knitting and Processing, Home Furnishing. With clear focus and ambitious growth plans on the anvil, the Group has been gearing itself to take on the future challenges. The Chirpal group had a turnover of `2900 crore with EBITDA of `321 crore and a PAT of `83 crore in FY14. The employee strength is 5000.
Given India's demographics, the decade ahead will offer even better prospects for the Indian Textile Industry as it is set for strong growth buoyed by both rising domestic consumption as well as export demand. Abundant availability of raw materials and a skilled workforce, uncertainties & rising costs in competing neighboring countries augurs well for India becoming a global sourcing hub. Looking at this potential of development of the textile industry, the Government of India has extended TUF Scheme for next Plan period and the State Governments have also launched special schemes to promote investment in textiles. As per a recent study by the industry experts, the denim market in India is set to touch over Rs 16,000 crore in the next three years by 2017 owing primarily to youngsters' obsession for the cult fabric. The boom will be fuelled by not only an increasing demand from small cities and rural areas, but also acceptance of the fabric at workplaces, the study adds. In terms of volumes, the denim market is estimated at 300 million pairs of jeans, which is projected to grow to 550-600 million by 2015. The huge opportunity in denim market augurs well for the future prospects of NDL.
"NDL has a vision of future growth through diversification in order to survive in a highly competitive environment. This is supported with quality products manufactured by NSL along with fully integrated textile plant to cater to the needs of customers by providing a variety of products under one roof. Further, it has targeted to achieve high volume in terms of quantity and value and also adding the capacity to improve its performance and thereby its share in the market. NDL is also in dialogue with the international brand players for the supply of its products. NDL has one of the largest denim fabric manufacturing capacities in the world. It is the second largest Denim manufacturer in India and 5th largest in the world. With the recent capacity addition, NDL is well placed to capitalize on the soaring demand of Denim Apparel. The ongoing expansion in its denim fabric capacity and backward integration by expanding its spinning capacity in FY15-16 will result in higher operating margins and improved return ratios. At the CMP of Rs 73, the share is trading at a P/E of 5.9x on FY16E and 3.1x on FY17E. We recommend BUY with a revised upward target price of Rs 110 (at a P/E of about 4.8x on FY17E) in the medium-to-long term", says Sunidhi Securities research report.
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