Result Update: Mirza International Ltd - BUY - TP Rs.104 - Kotak

MIL reported lower than expected Q2FY19 in terms of profit due to lower EBITDA margins and higher interest expenses.

Key Highlights

- MIL reported revenue of Rs 2.9bn, a growth of 23% yoy led by 41.7% yoy growth in branded shoes and 8.1% yoy growth in make to order exports. Make to order exports revenue recovered after long time with strong performance in rest of the world market. On domestic side, domestic brand sales grew by 60% yoy driven by robust growth in apparel and strong growth in new brands and products.

- EBITDA margin declined by 320 bps yoy to 14.4% and was below our estimates on account of lower margins in the branded shoes business on yoy basis led by higher discounts, MTM forex loss due to rupee depreciation and loss in tannery business due to cleaning up of old stock. The company witnessed increase in working capital which took its debt to Rs 3.5 bn (Vs Rs 2.7 bn at the end of Q4FY18).

- MIL management has maintained guidance for 50% growth in FY19E revenue from domestic brand business based on strong response expected for new brands and apparel. The company has good order in exports business for the next 3 months and expects 2-3% yoy growth in the segment in FY19E.

Valuation & outlook

We have cut our EPS estimates for FY19E & FY20E by 10.7% and 7.3% respectively factoring in lower margins and higher interest expenses in our estimates. The stock is trading at PE of 14.3x and 11x based on FY19E and FY20E revised EPS of Rs 5.7 (vs Rs 6.3) and Rs 7.4 (vs Rs 8.0), respectively. We retain our Buy rating on the stock with revised target price of Rs104 (Vs Rs120 earlier)

Shares of MIRZA INTERNATIONAL LTD. was last trading in BSE at Rs.80.6 as compared to the previous close of Rs. 80.35. The total number of shares traded during the day was 10521 in over 179 trades.

The stock hit an intraday high of Rs. 81.5 and intraday low of 79.05. The net turnover during the day was Rs. 848577.

Source : Equity Bulls

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