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Research
Kewal Kiran Clothing - Margins at Comfort, Maintain "BUY" - Karvy
Posted On : 2012-11-09 21:35:42( TIMEZONE : IST )
Kewal Kiran Clothing's (KKCL) sales, EBITDA and net income declined by 9%, 3% and 4% YoY respectively on delayed festive season
The Company's top-line declined 9% YoY to Rs. 916.9 mn during Q2FY13, while sequential growth was 61.3%. This slippage is due to delayed festive season YoY, which adversely impacted volume by 11.7%. We expect strong festive season in H2FY13 to cover up the revenue slippage. EBITDA margin for the quarter expanded by 164 bps YoY at 27.7% however EBITDA declined by 3.3% YoY to Rs. 254.4 mn during Q2FY13, due to revenue de-growth. The Company's realization per garment went up by 6.3% to Rs. 791 for Q2FY13. Net income of the Company declined 3.9% YoY to Rs. 176.5 mn while sequential growth was much higher at 143%. Net Income Margin improved by 103 bps YoY to 19.2%.
Product wise Revenue Analysis:
During Q2FY13, Jeans and T-Shirt grew 4% & 36% YoY to Rs. 601.5 mn and Rs. 4.0 mn respectively while Trousers and Shirts declined 37% & 25% to Rs. 89.7 mn and Rs. 14.1mn. Looking at individual brands, revenue from Killer grew 3% YoY to Rs. 472.9 mn while Integriti, Lawman & Easies de-grew by 6%, 24% & 30% to Rs. 237.2 mn, Rs. 153.3 mn & Rs. 15.1 mn respectively.
Killer maintains its flagship status with enhanced brand share of 52% from 46% while Integriti, the second largest brand has marginally increased its revenue contribution to 26% from 25%. FY2013, the company has been focusing on promoting Integriti, like they promoted Lawman in FY2012.
Outlook & Valuation: Kewal Kiran operates as branding and marketing company in retail apparels category. Most of its products are in the valuedriven segment, which are expected to register good growth going forward. At the CMP of Rs. 690, the stock is trading at a 16.1x and 13.5x of FY13E and FY14E EPS, respectively. We value KKCL at 14x FY14E EPS, and add Rs. 98 per share of cash and liquid investments of FY13E. We maintain our "BUY" recommendation with revised target price of Rs. 813 per share, which represents an upside potential of 18%.
