Buy KPR Mill: target of Rs 980 : Sharekhan

Sharekhan's research repor on KPR Mill

KPR Mill’s (KPR’s) new garment capacity of 42 mn pieces (total capacity will be 157 mn pieces) will start operating from mid-FY22. New capacity to add ~Rs. 150 crore and ~Rs. 500 crore in FY2022/23. Recent spike in COVID-19 cases acts as a risk to exports (especially to European market) in the short term. However, increasing demand for Indian textile products in the key export markets and augurs well from a medium term perspective. Increase in contribution from high-margin garment business and value-added products would help margins improve y-o-y (management targets OPM of 23%). RoE and RoCE will move above 20% in FY23.

Outlook

With OPM of ~20%, lean balance sheet and improving return ratio KPR is one of the better plays in textile space. We recommend a Buy on the stock with a PT of Rs. 980.

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