Buy KPR Mills Ltd - Fairwealth Securities Limited

Fairwealth Securities Limited has initiated coverage on KPR Mills, engaged in manufacturing of readymade knitted apparel, cotton knitted fabrics and yarns in India. KPR Mills is well poised for continuous growth driven by its positioning as a complete textile solutions provider. Sustained growth prospects of the company are supported by a unique procurement policy with a focus on premium products that offer higher margins. The company is planning to expand its export markets by leveraging its vertically integrated operations to strengthen the growth strategy.

Key Investment Rationale:

Integrated Textile Player

KPR Mills Ltd is well positioned as one of the largest vertically integrated textile players in India having an extensive gamut of products which consists of cotton yarn, knitted fabric and readymade knitted garments.

Moving up the ladder

The company has initiated expansion into high value added 100% compact yarn manufacturing capacity which is expected to be completed by March 2011. This would enhance the total spindlage capacity to 3,15,744 from 2,12,064 on March 2010.

Captive Power Will Improve EBIDTA Margins

KPR has Green power generation capacity of 40 windmills at Tirunellveli, Thenkasi, & Coimbatore that can generate power upto 40 MW which will cater about 75% of its power requirement through captive consumption.

Future Valuation:

At the current price of Rs 221, the stock is trading at 7.75 times of our estimated FY11E earnings, while it is available at just 7.06x of FY12E. We thus recommend a "BUY" with a target price of Rs 290.

Source : Equity Bulls

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