S. Kumars Nationwide - 1QFY2013 Result Update - Angel Broking

S. Kumars Nationwide Ltd (SKNL) reported a mixed set of numbers for 1QFY2013. On a standalone basis, the company's top-line grew by 12.9% yoy to Rs.884cr, in line with our estimate of Rs.898cr for the quarter. The company's operating margin improved marginally on a y-o-y basis by 44bp and came in at 21.2% for the quarter. The disappointment came at the PAT front on account of elevated interest and depreciation cost coupled with high tax outgo. The company's profit saw a decline of 13.5% on a y-o-y basis and stood at Rs.31cr, 34.2% lower our estimate of Rs.47cr.

Consolidated segmental performance: The revenue from consumer textile grew by 11.0% yoy to Rs.605cr (Rs.545cr), luxury textile (primarily comprising Reid & Taylor) grew by 14.4% yoy to Rs.279cr (Rs.244cr), ready to wear grew by 20.4% yoy to Rs.219cr (Rs.182cr), home textiles grew by 8.5% yoy to Rs.113cr (Rs.105cr) and luxury cotton grew by 29.7% to Rs.52cr (Rs.40cr). However, all the segments (except the luxury cotton segment) saw a contraction in their operating margins mainly because of an increase in the raw material cost. The revenue from international business declined marginally by 1.3% yoy to Rs.354cr (Rs.359cr) due to the slowdown in the European and the US markets.

Outlook and valuation

We expect SKNL's consolidated revenue to post a 14.2% CAGR to Rs.8,290cr and profit to post a 10.9% CAGR to Rs.486cr over FY2012-14E. Currently, at Rs.21, SKNL (standalone) is trading at a PE of 2.6x; and on a consolidated basis, it is trading at 1.3x for FY2014E. We maintain our Buy recommendation on the stock with a revised target price of Rs.38, based on SOTP valuation.

Source : Equity Bulls

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