Arvind Ltd (ARVLIM) 390 - ICICI...
Transcript of Arvind Ltd (ARVLIM) 390 - ICICI...
August 8, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Brands continue to create value…
Revenues for the quarter grew 18% YoY to | 2475 crore (I-direct
estimate: | 2328 crore). The growth was accelerated by higher growth
in brand & retail segment, which grew 22% YoY (up 40% including
Tommy Hilfiger & Calvin Klein) at | 673 crore (| 773 crore including TH
& CK). Power brands grew 15% YoY to | 417 crore. LTL growth was at
18% in power brands. Revenues for “Unlimited” grew 36% YoY with
LTL of 39%
Standalone textile business added to consolidated growth with
revenues of | 1557.4 crore (up 9.3% YoY). Garments accelerated the
standalone growth with 17% YoY rise in revenues to | 293 crore. In
addition to the same, wovens recorded growth of 4% to | 573 crore,
while Denim revenues grew 11% YoY to | 551 crore
Increase in RM costs (cotton prices up 22% YoY) impacted gross
margins, which declined 286 bps YoY to 54.3%. Higher employee
expenses (up 17% YoY) and other overheads (up 19% YoY) further
impacted EBITDA margins, which contracted 325 bps YoY to 8.4% (I
direct estimate: 9.5%). Subsequently, absolute EBITDA de-grew 15%
YoY to | 207 crore (I-direct estimate: | 221 crore)
Benefits for lower interest costs (down 31% YoY) came from a decline
in debt & lower taxation on account of deferred tax (19.7% vs. 31% in
Q1FY17) but were completely offset by higher depreciation expenses
(up 25% YoY) and lower other income (down 2% YoY). Reported PAT
was further impacted by exceptional expense of | 7 crore pertaining to
retrenchment, post which PAT was at | 56.8 crore. Excluding the
same, PAT was at | 63.7 crore (I-direct estimate: | 69 crore)
Consistent L2L in Unlimited – Signs of successful restructuring…
Growth in Unlimited remained robust, revalidating the business model
correction initiated over the past two years. Arvind has been constantly
reinventing this retail segment from an initially launched discounted retail
store to a value retail format. In order to shed its “discount store” image,
Arvind has rebranded its large format Megamart stores (>10000 sq ft) as
Unlimited. Apart from mass brands like Cherokee and Geoffrey Beene, the
management started offering premium brands like Arrow and US Polo. It
also started selling exclusive brands like Ruggers, Skinn, Elitus, Donuts,
Karigari, Mea Casa, Auburn Hill, Bay Island, Colt, Leisha and Edge.
Closure of unviable lossmaking stores led store count to reduce from 140
in FY15 to 81 stores in Q1FY18. Post completion of restructuring the
management intends to add 30-40 stores under this format and targets
revenue of | 800 crore for FY18 as compared to | 600 crore in FY17.
On track to achieve ambitious target $1 billion topline in B&R by 2020
Arvind plans to scale up its revenues to ~$1 billion (| 6500 crore) from
current | 2641 crore revenues in the B&R segment by 2020E.
Demonstrating revenue compounded quarterly growth rate (CQGR) of 7%
over the past nine quarters, we believe the management is on track to
achieve this ambitious target. It has guided to open 100 new retail stores
in FY18 under power brands (30 stores under each brand) and seven to
eight stores (five stores for Sephora and two or three stores of GAP)
under speciality retail segment. Enhanced retail coverage with benefits of
operating leverage and maturity of older stores will lead to better margins
resulting in higher earnings growth. We continue to believe that Arvind is
well positioned to capture a larger pie of the brand conscious Indian
market. Hence, we maintain BUY with a target price of | 480.
Arvind Ltd (ARVLIM) | 390
Rating matrix
Rating : Buy
Target : | 480
Target Period : 12 months
Potential Upside : 23%
What’s changed?
Target Unchanged
EPS FY18E Changed from | 17.5 to | 14
EPS FY19E Changed from | 23.9 to | 19.2
Rating Unchanged
Quarterly performance
| Crore Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)
Revenue 2,475.0 2,104.1 17.6 2,464.8 0.4
EBITDA 207.0 244.5 (15.3) 223.5 (7.4)
EBITDA (%) 8.4 11.6 -325 bps 9.1 -70 bps
PAT 56.8 73.3 (22.6) 96.9 (41.4)
Key financials
| Crore FY16 FY17 FY18E FY19E
Net Sales 8,011 9,236 10,516 11,842
EBITDA 951 943 1,016 1,206
Net Profit 316.1 320.1 361.6 496.2
EPS (|) 12.3 12.4 14.0 19.2
Valuation summary
FY16 FY17 FY18E FY19E
P/E (x) 31.8 31.4 27.8 20.3
Target P/E (x) 36.6 36.2 32.0 23.3
EV/EBITDA (x) 14.5 13.8 12.7 10.6
P / BV (x) 2.7 2.0 0.9 0.8
RONW (%) 11.9 9.0 9.6 11.8
ROCE (%) 11.0 9.9 10.5 12.3
Stock data
Particular Amount
Market Capitalization (| Crore) 10,076.0
Total Debt (FY17) (| Crore) 151.4
Cash (FY17) (| Crore) 1,478.8
EV (| Crore) 8,748.7
52 week H/L 427 / 286
Equity Capital (| Crore) 258.4
Face Value (|) 10.0
Peer Comparison
1M 3M 6M 12M
Raymond (0.69) (2.78) 50.78 66.52
Arvind Ltd (1.84) (13.52) (4.06) 23.59
K P R Mill Ltd (1.28) 5.03 31.43 44.47
Kewal Kir.Cloth. (5.42) (6.02) (3.49) (10.00)
Research Analyst
Bharat Chhoda
Ankit Panchmatia
Cheragh Sidhwa
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
| crore Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments
Revenue 2,475.0 2,328.7 2,104.1 17.6 2,464.8 0.4 Growth remained supportive of brand & retail (+22% YoY excluding CK and
TH) and textile business (up 9% YoY)
RM Cost 1,130.7 1,094.5 901.1 25.5 1,195.6 -5.4 Increase in cotton prices resulted in higher RM expenses
Employee Benefit Expenses 311.6 271.9 265.6 17.3 258.9 20.3
Other Expenditure 825.8 744.7 692.9 19.2 656.8 25.7
Total Expense 2,268.0 2,111.1 1,859.7 22.0 2,241.3 1.2
EBITDA 207.0 217.6 244.5 -15.3 223.5 -7.4
EBITDA Margin (%) 8.4 9.3 11.6 -325 bps 9.1 -70 bps
Depreciation 86.3 82.9 69.1 25.0 82.7 4.4
Interest 61.4 55.6 89.1 -31.1 58.5 5.0 Decline in debt resulted in reduction interest expenses
Other Income 16.3 17.5 16.6 -2.0 28.4 -42.6
PBT 75.6 96.6 102.9 -26.6 110.6 -31.7
Total Tax 13.5 27.3 31.7 -57.3 13.1 3.6
Exceptional Item -6.9 NA -0.2 NM -8.9 -22.5 Exceptional expenses on account of retrenchment related compensation
Reported PAT (Incld Minority Int) 56.8 69.3 73.3 -22.6 96.9 -41.4 Higher other income and lower tax rate moderated the decline in PAT
Key Metrics Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)
Textiles 1,557.4 1,425.0 9.3 1,459.5 6.7 Growth was mainly due to 17% growth in the garments business and 11%
growth in denim
Brand & Retail 773.7 554.1 39.6 828.3 -6.6 Excluding Tommy Hilfiger and Calvin Klien, B&R revenues grew by 22% YoY.
Power brands grew by 15% YoY to | 417 crore
Arvind Internet 1.7 0.2 876.5 2.7 -38.7 With the launch of NNNow, the internet business is gaining traction
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 10,513.0 10,516.2 0.0 11,837.1 11,841.7 0.0 Continue to maintain revenue growth estimates
EBITDA 1,122.9 1,015.8 -9.5 1,356.4 1,206.2 -11.1
EBITDA Margin (%) 10.7 9.7 -102 bps 11.5 10.2 -127 bps Higher RM costs would led to tapering of margin estimates
PAT 451.4 361.6 -19.9 617.9 496.2 -19.7
EPS (|) 17.5 14.0 -19.9 24.0 19.2 -19.7 Resultant impact on PAT
FY18E FY19E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Key Takeaways from conference call
The wholesale channels for the textiles and B&R segment were
impacted in June on account of a disruption in supply chain due to
GST transition. The management expects normalcy to return in the
next couple of months
Under B&R segment, revenues from wholesale channels declined
80% YoY while revenues from the retail channel grew 50% YoY
mainly on account of advancement of EOSS
Garment capacity is currently operating at almost full utilisation levels.
Currently, it has capacity of 28 million pieces and expects to increase
its capacity by 12 million pieces in two phases. The first phase of 5
million pieces is expected to be operational by Q2FY18 while the
remaining is expected to ramp up by FY18. After the new capacity
comes on stream, the company expects to maintain 20%+ growth in
the garmenting segment.
The management has guided a cautious outlook for textiles margins
on the back of increase in cotton prices and appreciation of rupee
against other currencies
The management has maintained its revenue guidance for FY18 with
an overall revenue growth of 13%. The textile segment is expected to
register a revenue growth of 8% with B&R to the tune of 22-24%
The management is expected to invest US$6-7 million in FY18 vs.
US$10 million in FY17
The management intends to open 30-40 Unlimited stores, 100 brand
stores (30-40 stores in each brand) and eight to nine stores in
speciality retail format (Sephora: five stores and GAP: three to four
stores)
Unlimited is expected to register revenue growth of 33% YoY to
~| 800 crore and expected to breakeven at the EBITDA level by FY18
For FY18, capex is estimated at | 450 crore, of which | 150 crore is
expected to be incurred for the B&R segment while the rest is to be
spent on the textile division. The management is planning to fund the
entire capex through internal accruals while keeping debt in the books
at the current levels (~| 3000 crore)
The management expects power brands to continue on its strong
revenue trajectory of ~20% every year. The growth is expected to
fuelled by its distribution expansion and category expansion. The
company has recently launched US Polo innerwear and US Polo kids
which have witnessed strong traction.
ICICI Securities Ltd | Retail Equity Research Page 4
Company Analysis
Arvind - One stop shop for apparel requirements
Arvind possesses key ingredients that would enable it to capture the high
trajectory growth opportunity in the apparel segment. Having diversity in
offerings across menswear, womenswear and kidswear; positions the
company as a one stop to shop for all apparel requirements of a family.
The company is equipped with probably the best portfolio of brands (both
owned and licensed) in the Indian apparel industry coupled with a
nationwide reach that would enable it to reach a large quantum of
customers across various price points. Arvind has products with a price
range starting from as low as | 400 to as high as | 15000, which provides
a variety of choices and entry points for each and every customer.
Exhibit 1: Everything for everyone..!!!
Mens Wear
Formal Casual Denim
Kids Wear
(|44000 cr / $8 bn)
Brands
Inner Wear
(|18000 cr / $3 bn)
Men Women Brands
Women Wear
(|95000 cr / $15 Bn)Mkt. Size (|105000 cr / $18 bn)
Source: Company, ICICIdirect.com Research
Over a period of time, Arvind has strategically built up its brand portfolio,
which includes a blended combination of mass brands, entry level
brands, premium brands and super premium brands. With this
combination, the company manages to capture customers across the
income pyramid. For menswear, it has entry level brands like Excalibur
and Cherokee and power brands like Arrow, US Polo and Flying Machine.
For women, it has brands like Elle and Karigari. For kidswear, it has
association with major brands like The Children’s Place (TCP) and GAP for
kids. Furthermore, brands like Tommy Hilfiger and GAP are available
across categories. Also, in the innerwear segment, the company is well
positioned with brands like Hanes & Tommy Hilfiger.
ICICI Securities Ltd | Retail Equity Research Page 5
Ethiopia plant to be commissioned from October onwards
The growth in the textiles segment for FY17 was mainly fuelled by growth
in the garmenting segment. Revenues from the garmenting segment
grew at a robust rate of 27.8% YoY to | 1125 crore. The company expects
ramping up of the Ethiopia plant by Q2FY18.
For FY17, revenues from woven rose fabric rose 10.1% YoY to | 2212
crore led by growth in volumes by 8.5% YoY to 127 mn metre whereas
average price improved marginally at | 169. Revenues from Denim de-
grew 1.3% YoY to | 1841 crore.
Arvind plans to leverage its manufacturing capabilities by aggressive
forward integration in the brand & retail space. It has been focusing on
international bridge to premium brands in India. Currently, its power
brands comprise US Polo, Tommy Hilfiger, Flying Machine & Arrow.
Overall, the B&R segment registered stellar growth of CAGR 45% in FY12-
16. Revenues of the B&R segment have grown from 22% in FY11 to 31%
in FY17. The B&R segment grew 26% YoY to | 2902 crore in FY17.
‘Power’ brands (excluding Tommy Hilfiger) grew 23% YoY to | 1678 crore
(3.2% LTL). Also, “Unlimited” reported significant growth of 16% YoY.
LTL for Unlimited branded stores grew 28% in FY17.
Technical textiles - future ahead
After the recent stake dilution, the company now intends to focus on the
textile division with major thrust in the field of “advanced material”
(erstwhile technical textiles). Technical textiles has immense potential,
particularly in developing countries. India currently accounts for less than
5% of the world technical textile production (value). Indian technical
textile industry has grown at a CAGR of 12% in 2008-16 from | 36755
crore to | 92499 crore. The growth has been driven by higher domestic
consumption and increased exports. Though still in the nascent stage,
Arvind has been constantly building on the technical textile business and
have been looking for newer opportunities for joint ventures with global
companies to either bring in technology or access to international
customers. As of FY16, the company had made investments of around
| 200 crore. The management believes that due to its varied application
and utility, technical textiles would position Arvind in the league of high
growth phase.
Focus on specialty retail store
The management of ALBL is keen on developing “Specialty retail”
channel. Formats under the specialty retail would include multi-offerings
under Unlimited, TCP, Aeropostale, GAP and Sephora. The company is
focusing on setting up more speciality retail stores, which would
contribute ~30% of the brand & retail revenue in FY18. The management
expects to break even from this segment in three years of its operations
and generate positive EBITDA in the range of 7-9% by FY22.
Nnow.com: Arvind’s foray into omni-channel play
In the quest to upgrade customer experience through Omni channel and
leverage its global brands on a digital platform Arvind has launched
‘nnnow.com’, which provides access to a complete range of Arvind
brands online. The current stores pan-India are acting as warehouses for
the online platform. Approximately 40-50% of the online business is
fulfilled through its own stores in the vicinity. Investments made in Arvind
internet for FY17 were around | 55-60 crore.
ICICI Securities Ltd | Retail Equity Research Page 6
Valuation
Standalone business valued at 3.5x FY19 EV/EBITDA
Given the company’s expertise in manufacturing garments, coupled with
its positioning as the most preferred franchisee/distribution partner in
India, it is poised to benefit from an increase in apparel demand. Arvind’s
standalone revenue, which includes textiles and garments, grew at a
CAGR of 17% in FY11-17. Majority of this growth was driven by growth in
its fabric division, which grew at 16% CAGR in FY11-17. The increase in
fabrics revenues was mainly supported by 16% CAGR in woven, followed
by denim revenues, which grew at a modest CAGR of 4%.
Apart from fabrics, the company manufactures garments for brands like
Tommy Hilfiger, Calvin Klein, H&M, M&S, FCUK and Jack & Jones.
Revenues from the same grew at a CAGR of 17% in 2012-17. Over the
past few years, the company’s investments in augmenting its garmenting
capacities were insignificant. The company now intends to double its
garmenting capacity and has targeted 40 million capacity by 2020.
Further, currently only 7% of fabrics produced are used for production of
garments that the company intends to increase to 25%. With the
enhancement of capacity, standalone revenues would be mainly driven
by garments. Garment revenues have increased at a CAGR of 17% in
2012-17, which is further expected to grow at a CAGR of ~20% in FY17-
19E. Furthermore, additional investments in new segments like technical
textiles will drive standalone revenues. We believe the standalone
business has different dynamics and has very different working capital
cycle. Thus, we value the standalone business on the basis of EV/EBITDA.
We roll over the year and value the standalone business at 3.5x FY19E
EV/EBITDA.
Exhibit 2: Peer comparison for standalone business….
Figures (Rs crs)
Company Price Sales EBIDTA OPM PAT PAT % FY17 FY18E FY19E
Nandan Denim 149.0 1,220.4 189.9 15.6 56.7 4.6 4.8 4.2 3.8
KPR Mills 770.0 2,816.0 590.7 21.0 286.2 10.2 10.8 11.5 10.5
Vardhman Textiles 1,204.0 6,066.8 1,717.4 28.3 981.4 16.2 6.2 5.5 5.4
Average EV/EBIDTA 7.3 7.1 6.6
FY16 EV/EBIDTA
Source: ICICIdirect.com Research
Peers are quoting at a multiple of 6x FY18 EV/EBITDA but Arvind’s lower
focus on the same warrant our lower multiple of 3.5x EV/EBITDA. We
arrive at an SOTP value of the standalone business at | 31/share.
Exhibit 3: Valuing standalone business….
SOTP
Arvind Standalone
Target EV/EBITDA (x) 3.5
EBITDA (FY19E) 877.4
Net Debt 2,274.5
Enterprise Value (| Crore) 3,070.9
Target Market cap Core business (| crore) 796.4
Value/Share 31
Source: ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Brands & retail business - Recent deal to re-rate valuations at 2.5x
The theme around brands and positioning apparel as a ‘bridge to luxury’
segment has seen only a handful of players like Madura and Page getting
it right and being successful. The growth from branded apparel has been
lumpy with close to 200 international brands currently present in the India
fashion segment. Currently, Arvind has four power brands with each
having a turnover of ~| 2700 crore. The company estimates that each of
these brands would be scaled up to | 5000 crore. Over a decade, the
company believes it has added sufficient number of brands and now
wants to focus on its monetisation. The recent restructuring of Megamart
and closure of unsuccessful ventures like Debenhams and Next affirm the
management efforts to focus on profitable growth.
In addition, garmenting capabilities of the company position it as the most
preferred partner in India. Majority of brands in India, though not
profitable, are targeting revenue growth. However, profitability will creep
in once significant scale is achieved. To quote the management, “When a
brand attains a turnover of | 100-150 crore it gets out of negative EBITDA.
By the time it touches | 250 crore, RoCE becomes attractive. By the time
it gets to | 350 crore, a brand makes tonnes of money”. With the currently
successful launch of GAP store and target audience for Aeropostale, it is
well poised to create a number of powerbrands by 2020. We believe that
one of the brands would be converted into a powerbrand in 2018. On
account of this, powerbrand revenues are expected to grow at 33% CAGR
while due to the shift, growth of other brands would be lower at 11%
CAGR in 2017-19. We believe this business would be valued on the basis
of sales the company is able to achieve and, following this, the estimated
market capitalisation it would demand. We value its brands & retail
business using the market capitalisation to sales method. Thus, we value
the company at an average multiple of 2.5x and arrive at a value of | 449
per share.
Exhibit 4: Peer comparison brands & retail business….
Figures (Rs crs)
Company
Market
Capitalization FY15 FY16 FY17 FY18E FY19E FY17 FY18E FY19E
Kewal Kiran 2,060.3 405.1 453.0 488.4 488.4 618.2 4.2 4.2 3.3
Monte Carlo 1,049.6 582.6 621.5 584.1 584.1 789.6 1.8 1.8 1.3
Raymond 4,758.5 5,332.6 5,176.8 5,391.3 2,822.2 6,673.7 0.9 1.7 0.7
Trent 9,370.9 2,284.3 1,589.3 1,833.9 1,738.1 3,295.9 5.1 5.4 2.8
Average Mcap/Sales 3.0 3.3 2.1
Sales Market Cap/Sales
Source: ICICIdirect.com Research
Exhibit 5: Valuing brands & retail business….
SOTP
Arvind Lifestyle & Brands
Target Market Cap/Sales (x) 2.5
Sales (FY19E) 4,593
Market Capitalization (FY19E) 11,578.9
No. of Shares 25.8
Price target (|) 449
Source: ICICIdirect.com Research
Consolidated valuation
Applying the EV/EBITDA multiple of 3.5x to its standalone business and
market capitalisation to sales multiple of 2.5x to its brands & retail
business, we arrive at a consolidated target price of | 480/share. We have
a BUY recommendation on the stock.
ICICI Securities Ltd | Retail Equity Research Page 8
Recommendation history vs. Consensus
150
200
250
300
350
400
450
500
Aug-17May-17Mar-17Dec-16Oct-16Aug-16May-16Mar-16Dec-15Oct-15
(|
)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
(%
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Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Dec-04 Arvind Brands Ltd made subsidiary company of Arvind
Jul-10 Launches The Arvind Store and its first major real estate project
Oct-11 Sets up joint venture for marketing Tommy Hilfiger brand
Aug-12 Signs distribution agreement with Billabong Arvind acquires India operations of Debenhams, Next, Nautica
Sep-13 Signs agreement for licenses of Hanes Enters long term licensing agreement with Iconix Lifestyle India
Oct-14 Buys 49% stake in Calvin Klein in India Set up joint venture (JV) with Goodhill Corporation of Japan for launch of formal suits
May-15 Launches the first GAP store in Delhi; the company ties up with American specialty retailer - Aeropostale
Jul-15 Reports Q1FY16 results with 6% growth in revenues; brands & retail revenues at | 527 crore
Oct-15 Reports Q2FY16 results in line with estimates. Textiles grew by 5% YoY and Brands & Retail grew by 9% YoY
Feb-16 Reports Q3FY16 results in line with expectation. Textiles remained stagnant and brand & retail grow 12%
May-16 Launch of nnnow.com
Aug-16 Reports Q1FY17 results in line with expectation. Textiles grew by 13%; brand & retail grew by 26%
Oct-16 Reports Q2FY17 results. Stake sale of 10% to "Multiples" at | 740 crore in ALBL. Revenues grew by 19% YoY; Brands & Retail grew by 33% YoY, textile grew by
9%
Jan-17 Reports Q3FY17 results with revenues growth of 15% YoY; Brands & Retail grew by 25% YoY, textile grew by 8%. Debt reduced to | 2780 crore
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Investor Name Latest Filing Date % O/S Position Change (m)
1 Aura Securities Pvt. Ltd. 31-Mar-17 36.97% 95.6 -1.8
2 Life Insurance Corporation of India 31-Mar-17 4.23% 10.9 0.0
3 Multiples Alternate Asset Management Private Limited 31-Mar-17 4.18% 10.8 0.0
4 Dimensional Fund Advisors, L.P. 30-Jun-17 3.13% 8.1 0.0
5 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Jun-17 2.68% 6.9 0.2
6 Kotak Mahindra Asset Management Company Ltd. 30-Jun-17 2.48% 6.4 0.0
7 AML Employees Welfare Trust 31-Mar-17 2.45% 6.3 0.0
8 Sundaram Asset Management Company Limited 31-May-17 1.83% 4.7 -0.1
9 Lalbhai Group 31-Mar-17 1.60% 4.1 0.0
10 Reliance Nippon Life Asset Management Limited 30-Jun-17 1.44% 3.7 0.6
(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Promoter 43.8 43.8 43.8 43.1 42.9
FII 22.9 22.5 22.6 24.8 25.9
DII 16.1 16.2 16.4 15.3 13.8
Others 17.2 17.5 17.2 16.8 17.3
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor Name Value Shares Investor Name Value Shares
Avadh Material And Equipment Suppliers Pvt. Ltd. 4.9 0.8 Aura Securities Pvt. Ltd. -11.0 -1.8
Reliance Nippon Life Asset Management Limited 3.3 0.6 Tata Asset Management Limited -6.1 -1.1
Franklin Templeton Asset Management (India) Pvt. Ltd. 1.1 0.2 Lalbhai (Sanjaybhai Shrenikbhai) -4.9 -0.8
Amundi Hong Kong Limited 1.2 0.2 Shah (Jayesh Mohanlal) -2.8 -0.5
Trilogy Global Advisors, LP 1.0 0.2 Driehaus Capital Management, LLC -1.3 -0.2
BUY SELL
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Total operating Income 8,010.6 9,235.5 10,516.2 11,841.7
Growth (%) 2.0 15.3 13.9 12.6
Raw Material Expenses 3,466.6 4,196.5 4,837.4 5,388.0
Employee Expenses 898.1 1,096.3 1,293.6 1,494.1
Manufacturing & Other Expenses 2,685.1 2,986.5 3,354.7 3,736.9
Project Expenses 9.7 12.9 14.7 16.5
Total Operating Expenditure 7,059.5 8,292.2 9,500.3 10,635.5
EBITDA 951.1 943.4 1,015.8 1,206.2
Growth (%) (0.8) 7.7 18.7
Depreciation 240.5 297.1 321.6 345.6
Interest 358.6 288.4 272.2 262.7
Other Income 82.1 78.0 70.2 73.7
PBT 434.0 435.9 492.2 671.6
Growth (%) (13.0) 0.4 12.9 36.4
Total Tax 124.6 99.7 120.5 165.4
PAT (adj. exceptional gains/loss) 316.1 320.1 361.6 496.2
Growth (%) (7.3) 1.2 13.0 37.2
EPS (|) 12.3 12.4 14.0 19.2
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Profit before Tax 435.4 417.8 482.2 661.6
Add: Depreciation 240.5 297.1 321.6 345.6
(Inc)/dec in Current Assets (308.8) (453.5) (87.5) (494.8)
Inc/(dec) in CL and Provisions 230.5 299.9 (30.4) 151.5
Taxes Paid (124.6) (99.7) (120.5) (165.4)
Interest on borrowings 358.6 288.4 272.2 262.7
CF from operating activities 831.5 750.0 837.6 761.3
(Inc)/dec in Investments (118.2) 147.8 (19.8) (20.8)
(Inc)/dec in Fixed Assets (412.0) (353.1) (275.6) (320.5)
(Inc)/dec in Intangible Assets (63.4) (33.5) 29.8 23.8
Others (2.9) 2.6 (19.1) (23.0)
CF from investing activities (596.5) (236.3) (284.7) (340.4)
Issue/(Buy back) of Equity - 0.1 (0.1) -
Inc/(dec) in loan funds 278.8 (853.2) (100.0) (100.0)
Dividend paid & dividend tax 79.0 74.6 74.6 74.6
Interest paid & Others (601.7) 257.6 (512.6) (386.7)
CF from financing activities (243.8) (520.8) (538.1) (412.0)
Net Cash flow (8.8) (7.1) 14.7 8.8
Opening Cash 69.7 60.9 53.9 68.6
Closing Cash 60.9 53.8 68.6 77.4
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Liabilities
Equity Capital 258.2 258.4 258.2 258.2
Reserve and Surplus 2,388.2 3,309.8 3,505.8 3,952.3
Total Shareholders funds 2,646.4 3,568.2 3,764.0 4,210.5
Total Debt 3,818.8 2,965.6 2,865.6 2,765.6
Deferred Tax Liability (124.0) (144.1) (151.3) (158.9)
Minority Interest / Others 55.6 151.4 159.0 167.0
Total Liabilities 6,396.8 6,541.1 6,637.3 6,984.2
Assets
Gross Block 3,659.5 4,012.6 4,288.2 4,608.6
Less: Accumlated depreciation 369.4 607.7 929.3 1,274.9
Net Block 3,290.1 3,404.9 3,358.9 3,333.7
Capital WIP 98.3 95.7 114.8 137.8
Intangibles 115.4 148.9 119.1 95.3
Total Fixed Assets 3,388.4 3,500.6 3,473.7 3,471.5
Investments 543.8 396.0 415.8 436.6
Inventory 1,920.5 2,382.8 2,304.9 2,595.4
Debtors 768.2 813.9 864.3 973.3
Loans and Advances 704.8 584.7 643.1 707.5
Other Current Assets 498.8 564.4 620.8 651.8
Cash 60.9 53.9 68.6 77.4
Total Current Assets 3,953.2 4,399.6 4,501.8 5,005.4
Trade Payables 1,214.2 1,478.8 1,402.7 1,510.9
Provisions 58.8 64.5 74.2 77.9
Other Current Liabilities 330.8 360.2 396.3 435.9
Total Current Liabilities 1,603.7 1,903.6 1,873.1 2,024.7
Net Current Assets 2,349.5 2,496.1 2,628.7 2,980.8
Application of Funds 6,396.8 6,541.1 6,637.3 6,984.2
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17 FY18E FY19E
Per share data (|)
EPS 12.3 12.4 14.0 19.2
Cash EPS 21.6 23.9 26.5 32.6
BV 102.5 138.1 145.8 163.0
DPS 0.0 0.0 0.0 0.0
Cash Per Share 2.4 2.1 2.7 3.0
Operating Ratios
EBITDA Margin (%) 11.9 10.2 9.7 10.2
PBT Margin (%) 5.4 4.5 4.6 5.6
PAT Margin (%) 3.9 3.4 3.4 4.2
Inventory days 87.5 94.2 80.0 80.0
Debtor days 35.0 32.2 30.0 30.0
Creditor days 55.3 58.4 48.7 46.6
Return Ratios (%)
RoE 11.9 9.0 9.6 11.8
RoCE 11.0 9.9 10.5 12.3
RoIC 12.3 10.8 11.5 13.6
Valuation Ratios (x)
P/E 31.8 31.4 27.8 20.3
EV / EBITDA 14.5 13.8 12.7 10.6
EV / Net Sales 1.7 1.4 1.2 1.1
Market Cap / Sales 1.3 1.1 1.0 0.8
Price to Book Value 2.7 2.0 0.9 0.8
Solvency Ratios
Debt/EBITDA 4.0 3.1 2.8 2.3
Debt / Equity 1.4 0.8 0.8 0.7
Current Ratio 2.4 2.3 2.4 2.4
Quick Ratio 1.2 1.0 1.1 1.2
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
ICICIdirect.com coverage universe (Retail & Textile)
CMP M Cap
(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Kewal Kiran Clothing 1674 1684 Hold 2127 55.1 69.2 59.0 30.8 24.6 28.8 20.2 20.8 22.9 30.5 23.8 20.7 22.7 23.8 19.5
Page Industries
(PAGIND)
16400 12500 Sell 18808 208.5 238.7 296.6 78.7 68.7 55.3 42.6 38.8 31.0 61.0 53.0 59.1 46.0 40.0 44.5
Rupa & Company 473 425 Buy 3906 8.3 9.1 12.0 57.1 52.1 39.3 23.7 22.1 18.1 22.9 23.6 25.3 17.9 16.4 19.2
Vardhman Textiles 1200 1240 Hold 6890 100.9 179.0 107.6 13.0 7.3 12.2 8.3 7.3 6.9 14.1 14.5 14.3 15.4 23.0 13.1
Arvind Ltd 390 480 Buy 9431 21.6 23.9 26.5 14.5 13.8 12.7 1.7 1.4 1.2 12.3 10.8 11.5 11.0 9.9 10.5
RoCE (%) RoE (%)
Sector / Company
EPS (|) P/E (x) EV/EBITDA (x)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 12
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