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Q4FY21 Company Update - KPR Mill - ICICI Direct

Posted On: 2021-05-02 02:42:21 (Time Zone: UTC)

KPR Mill continued to witness encouraging demand across all its segments in Q4FY21. Revenue for the quarter grew 28% YoY (20% QoQ) to Rs. 1117.9 crore, with textile division (80% of sales) posting 26% YoY (12% QoQ) growth, sales from sugar division inching up 50% YoY (81% QoQ). On the back of healthy order book, sustained demand for casualwear products (where KPR's expertise lies), garment volumes jumped 12% YoY to 29.7 million (mn) pieces. However, realisations were lower at Rs. 127/piece (average realisations: Rs. 150-160) on the back of unaccounted export incentive (~4-5%). KPR is awaiting clarity on the new RoDTEP incentive and will be accounting for it in subsequent quarters retrospectively. Export order book at the end of Q3FY21 was healthy at Rs. 575 crore. Demand for cotton yarn globally in the past few months has been pretty robust, translating into significant rise in yarn realisation. Revenue from yarn & fabric division grew robustly by 42% YoY to Rs. 496 crore driven by 22% realisation growth, 17% volume growth. EBITDA margins for the quarter expanded substantially by 810 bps YoY to 24% with absolute EBITDA growth of 94% YoY (6% QoQ) to Rs. 267.5 crore. KPR has two major capex projects in the pipeline worth Rs. 750 crore towards garmenting facility (Rs. 250 crore), ethanol facility (Rs. 500 crore).

Valuation & Outlook

KPR generated healthy operating cashflows worth ~Rs. 580 crore (CFO/EBITDA: 70%) in FY21E due to healthy profitability growth and controlled working capital cycle (NWC days: 115). Liquidity position continues to remain robust with net debt worth ~ Rs. 350 crore (D/E: 0.2x). Of the total proposed capex worth Rs. 750 crore, KPR has already incurred Rs. 235 crore in FY21. Balance capex requirements will be incurred in FY22E, which will be a mix of internal accrual and debt (garmenting covered under TUFS and 50% interest subsidy for ethanol capacity). Capital deployment towards value accretive projects (targeted RoCE: garmenting: 30%, ethanol: 22%) augurs well for KPR. Resilient performance during challenging times (RoCE improvement by 440 bps YoY to 24% in FY21) instils confidence in the business model. We revise our earnings estimates upwards by 6-8% for FY22-23E & model in earnings CAGR of 16% in FY21-23E. We reiterate BUY and value it at Rs. 1620 i.e. 16x FY23E EPS (1x PEG, earlier TP: Rs. 1200).

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Shares of K.P.R. Mill Limited was last trading in BSE at Rs.1380 as compared to the previous close of Rs. 1359.6. The total number of shares traded during the day was 3220 in over 537 trades.

The stock hit an intraday high of Rs. 1385.95 and intraday low of 1331.75. The net turnover during the day was Rs. 4405050.

Source: Equity Bulls

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