This stock is analysts' top pick in textiles

Mumbai: With a strong balance sheet, improving retail sales in key export markets, incremental revenues from new ethanol facilities and commissioning of the new garmenting capacity from next year, KPR Mills just received a thumbs-up from the analysts.The company, which has increased its cash balance and reduced consolidated debt in the first half of FY21, can give up to 30 per cent return over the next one year, according to analysts.The stock has rallied 17 per cent in the last year. It is currently trading at 9.5 times its FY23 estimated earnings, compared with its five-year average forward PE of 13.3.“With an operating profit margin of over 20 per cent and strong balance sheet, KPR is one of the best textile plays, especially in the cotton yarn and garmenting space,” said Kaustubh Pawaskar, AVP-Research, Sharekhan. “Recovery in export markets, focus on shifting base from China to other markets and likely implementation of favourable textile policies by the Indian government would augur well for KPR in the medium term.”The company has reduced its consolidated debt from Rs 788 crore to Rs 356 crore in the first half of current fiscal while its cash and cash equivalents grew from Rs 154 crore to Rs 188 crore during this period. Debt-Equity ratio has reduced to 0.21 times as of September from 0.44 times in March.79070746“KPR is among the best performers in the sector owing to their strong fundamentals, and attractive business model,” said Thomas Abraham, analyst, Karvy Stock Broking. “We believe the company will come out of this economic crisis stronger than its peers with better market share and foothold in the domestic under-penetrated garmenting division.”KPR is one of the largest vertically integrated textile manufacturing companies in India with a presence across the value chain from fibre-to-fashion. To cater to the growing market demand and tapping the potential markets, the company plans to set up a new garment factory of 42 million garments per annum at an estimated capex of Rs 250 crore.“We expect the garmenting division to be the next growth engine and register revenue CAGR of 15 per cent. While a higher proportion of garmenting enhances overall margin profile as the segment yields margins in the range of 22-23 per cent, while high asset turnover would translate into RoCE improvement by 370 bps to 23 per cent in FY20-23,” said Bharat Chhoda, analyst, ICICI Securities.

from Economic Times https://ift.tt/350MZPj