Arvind Ltd (ARVMIL) | 396static-news.moneycontrol.com/static-mcnews/2017/05/IDirect_Arvin… ·...

May 12, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Margins slide on higher input costs…

Arvind’s Q4FY17 consolidated revenues were marginally above our

estimates. However, profitability slightly missed our estimates

Revenues for the quarter grew 10.4% YoY to | 2464.8 crore (I-direct

estimate: | 2409.3 crore). Growth was fuelled by 22% YoY growth in

its brand & retail segment, which came in at | 829.2 crore. Standalone

textile business added to consolidated growth with revenues of

| 1459.5 crore (up 7.7% YoY)

‘Power’ brands (excluding Tommy Hilfiger) grew 21% YoY to | 515

crore (5.4% LTL). “Unlimited”, post completion of restructuring,

continued its growth trajectory in the current quarter reporting growth

of 29% YoY

Garments accelerated standalone growth with 28% YoY rise in

revenues to | 324 crore. In addition to the same, wovens posted

growth of 6.4% to | 535 crore while denim revenues were flattish at

| 462 crore. Sales volume for denim fabric was down 4.4% YoY to 24

million metre whereas volumes for woven were up 6.5% YoY to 31

million metre

Increase in cotton prices (up 17% YoY) coupled with higher share of

traded goods, adversely impacted consolidated EBITDA margins,

which fell 260 bps YoY to 9.1% vs. estimated 11.4%. Subsequently,

absolute EBITDA de-grew 14% YoY to | 223.5 crore vs. estimate

| 273.5 crore

Moderation of debt (down 19% YoY) resulted in a decline in interest

costs (down 35% YoY). In addition to the same, higher other income

(up 49% YoY) and lower tax rate (12% vs. 21% in Q4FY16) to an

extent moderated the PAT decline, which was at | 96.9 crore (I-direct

estimate: | 98.5 crore)

B&R segment margins improve led by ‘Power’ brands

The momentum in the B&R segment continued in Q4FY17 as it reported

robust revenue growth of 21.7% YoY to | 829.2 crore. Strong growth in

‘Power’ brands, coupled with improving profitability in ‘Unlimited’ and

speciality retail stores led to a strong expansion in EBITDA margins of

B&R segment by 350 bps YoY to 7.1%. Going forward, we expect the

momentum in B&R segment to continue resulting in revenue CAGR of

20% in FY16-19E.

Increase in cotton prices impacts profitability of standalone business…

Higher cotton prices impacted the profitability of the textile segment as

operating margins declined 260 bps YoY to 12.7%. Also, average

realisation (per metre) for denim and woven fabrics remained flattish YoY

to | 181 and | 167, respectively. At a consolidated level, we expect

operating margins to stay under pressure due to higher share of B&R

segment in revenue mix (low margin business) and high cotton prices.

Robust growth in B&R segment expected to continue; maintain BUY…

Brands of ALBL are uniquely positioned as the apt mix across the apparel

value/gender chain. In addition, strong EBITDA growth for the B&R

segment in Q4FY17 indicates operating leverage playing in favour of the

company. Enhanced focus would continue to be on speciality retail

segment, which comprises brands like GAP, Sephora & Aeropostale, The

Children’s place (TCP). We believe that as revenues from these brands

scale up, RoCEs would drastically improve. With visibility on profitable

earnings, Arvind continues to stay our preferred pick in the textile sector.

Arvind Ltd (ARVMIL) | 396

Rating matrix

Rating : Buy

Target : | 480

Target Period : 12 months

Potential Upside : 21%

What’s changed?

Target Unchanged

EPS FY18E Changed from | 21.8 to | 17.5

EPS FY19E Changed from | 27.9 to | 23.9

Rating Unchanged

Quarterly performance

| Crore Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)

Revenue 2,464.8 2,232.8 10.4 2,335.5 5.5

EBITDA 223.5 260.4 (14.2) 237.0 (5.7)

EBITDA (%) 9.1 11.7 -259 bps 10.1 -108 bps

PAT 96.9 97.8 (0.9) 75.5 28.4

Key financials

| Crore FY16 FY17E FY18E FY19E

Net Sales 8,011 9,236 10,516 11,842

EBITDA 951 943 1,123 1,356

Net Profit 316.1 320.1 451.4 617.9

EPS (|) 12.3 12.4 17.5 23.9

Valuation summary

FY16 FY17E FY18E FY19E

P/E (x) 32.3 31.9 22.6 16.5

Target P/E (x) 36.6 36.2 25.6 18.7

EV/EBITDA (x) 14.4 13.8 11.5 9.4

P / BV (x) 2.7 2.0 1.0 0.8

RONW (%) 11.9 9.0 12.6 15.0

ROCE (%) 11.6 10.1 12.9 15.1

Stock data

Particular Amount

Market Capitalization (| Crore) 104,797.4

Total Debt (FY17) (| Crore) 231.9

Cash (FY17) (| Crore) 199.8

EV (| Crore) 104,829.5

52 week H/L 426 / 286

Equity Capital (| Crore) 2,646.4

Face Value (|) 10.0

Peer Comparison

1M 3M 6M 12M

Kewal Kir.Cloth. 3.09 (0.37) (6.67) (2.58)

Arvind Ltd 5.68 9.47 8.26 45.97

Raymond 18.92 52.00 31.52 62.23

K P R Mill Ltd 9.26 29.76 31.09 72.22

Research Analyst

Bharat Chhoda

[email protected]

Ankit Panchmatia

[email protected]

Cheragh Sidhwa

[email protected]


Variance analysis

| crore Q4FY17 Q4FY17E Q4FY16 YoY (%) Q3FY17 QoQ (%) Comments

Revenue 2,464.8 2,409.3 2,232.8 10.4 2,335.5 5.5 Growth remained supportive of brand & retail (+22% YoY) and textile

business (+8% YoY)

RM Cost 1,195.6 1,055.9 994.1 20.3 1,034.4 15.6 Increase in cotton prices resulted in higher RM expenses

Power & Fuel 130.0 124.7 118.0 10.2 120.8 7.6

Employee Benefit Expenses 258.9 292.1 238.6 8.5 288.0 -10.1

Other Expenditure 656.8 663.1 621.8 5.6 655.3 0.2

Total Expense 2,241.3 2,135.8 1,972.5 13.6 2,098.4 6.8

EBITDA 223.5 273.5 260.4 -14.2 237.0 -5.7

EBITDA Margin (%) 9.1 11.4 11.7 -259 bps 10.1 -108 bps

Depreciation 82.7 73.4 62.9 31.4 73.4 12.8

Interest 58.5 75.6 90.0 -35.0 67.6 -13.5 Decline in debt resulted in reduction interest expenses

Other Income 28.4 11.1 19.0 49.0 10.9 160.0

PBT 110.6 135.7 126.5 -12.5 107.0 3.5

Total Tax 13.1 40.7 26.7 -51.0 28.1 -53.5

Reported PAT (Incld Minority Int) 96.9 98.5 97.8 -0.9 75.5 28.4 Higher other income and lower tax rate moderated the decline in PAT

Key Metrics Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)

Textiles 1,459.5 1,354.7 7.7 1,402.2 4.1 Growth was mainly due to 28% growth in the garments business and

6.4% growth in wovens

Brand & Retail 829.2 681.1 21.7 764.5 8.5 With new Ind-As, Tommy Hilfiger revenues would now not form a part of

brands & retail. Adjusting for the same, power brands grew 21% YoY.

However, overall brand & retail grew 22%

Real Estate & Others 0.0 0.0 NA 0.0 NA Due to de-merger of real estate business

Arvind Internet 5.8 2.0 188.9 4.7 22.1 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 1,353.1 1,122.9 -17.0 1,582.5 1,356.4 -14.3

EBITDA Margin (%) 12.9 10.7 -219 bps 13.4 11.5 -191 bps Revise our esimates downwards

PAT 561.2 451.4 -19.6 719.1 617.9 -14.1

EPS (|) 21.8 17.5 -19.7 27.9 23.9 -14.2 Revise our esimates downwards

FY18E FY19E



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)


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.


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 45% CAGR 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.

Exhibit 2: Segment wise revenue

27% 27% 28% 26% 33% 32% 29% 30% 28% 29% 30%31%

33%

26% 32% 33%34% 31% 36% 39%

4% 4% 3% 4% 4% 5% 6% 7% 6% 5% 4% 6%9%

0%6% 7% 7%

5% 7% 7% 7%

54%

74%70% 70%

68%70%

63% 62% 64% 65%

67%67% 64% 61%

67% 68%

61% 60% 61% 62%57%

22%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY11

FY12

FY13

FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17E

FY18E

FY19E

Textiles B&R Others


Exhibit 3: New reporting segment-wise



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

has 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 ~| 200

crore. The management believes that due to its varied application and

utility, technical textiles would catapult Arvind to the 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.

Unlimited to take charge of Megamart; LTL of 28% impressive FY17

To counter the decline in margins, the management has repositioned

Megamart from a discount store to value retail with a higher proportion of

private labels. The Megamart was rechristened Unlimited, which would

not take into account that Arvind’s value retail business has been

struggling with sluggish revenue growth and low margins over the last

couple of years. The strategy is to attract customers by offering discounts

on reputed brands like Arrow, Park Avenue, Van Heusen and try to

convert them into buying its own private labels. Also, several small stores

have been closed while some large format stores have been opened

resulting in a reduction in the number of “Unlimited” stores from 216 in

FY12 to 86 stores in as on FY17.

The large format “Unlimited” stores have been positioned as a size of

10000 sq ft per store. Arvind currently has ~20% area under the power

Unlimited format and is planning to scale it up to 50% in the next two

years. The shift in favour of large format stores has led the area per store

for Unlimited to increase from 3100 sq ft in FY12 to 8446 sq ft in FY17.

The repositioning of Unlimited as value retail is expected to boost

revenue growth and enhance margins, going ahead.


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 FY11-16. Majority of this growth was driven by growth in

its fabric division, which grew at 16% CAGR in FY11-16. 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 2012-16. Over the

past few years, the company’s investments in augmenting its garmenting

capacities were insignificant. Arvind 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 2012-16, which is further

expected to grow at a CAGR of ~20% in FY16-19E. 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 4: Peer comparison for standalone business….

Figures (Rs crs)

Company Price Sales EBIDTA OPM PAT PAT % FY17E FY18E FY19E

Nandan Denim 120.0 1,156.7 191.2 16.5 63.3 5.5 4.2 3.7 3.3

KPR Mills 580.0 2,500.4 469.6 18.8 210.1 8.4 8.5 9.1 8.2

Vardhman Textiles 1,224.0 6,723.3 1,401.8 20.8 578.6 8.6 6.8 6.1 6.0

Average EV/EBIDTA 6.5 6.3 5.8

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 5: 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



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 2015-19. 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 6: Peer comparison brands & retail business….

Figures (Rs crs)

Company

Market

Capitalization FY15 FY16 FY17E FY18E FY19E FY17E FY18E FY19E

Kewal Kiran 2,164.8 405.1 453.1 521.9 605.4 665.9 4.1 3.6 3.3

Monte Carlo 880.1 581.1 620.0 686.1 845.4 929.9 1.3 1.0 0.9

Raymond 3,162.1 5,332.6 5,594.7 5,963.1 6,533.2 7,186.5 0.5 0.5 0.4

Trent 8,440.4 2,496.1 2,353.3 2,997.5 3,793.5 4,172.9 2.8 2.2 2.0

Average Mcap/Sales 2.2 1.8 1.7

Sales Market Cap/Sales


Exhibit 7: 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


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.


Recommendation history vs. Consensus

150

200

250

300

350

400

450

500

Apr-17Feb-17Nov-16Sep-16Jun-16Apr-16Jan-16Nov-15Aug-15Jun-15Apr-15

(|

)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

(%

)

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


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. 28-Feb-17 3.54% 9.1 4.5

5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 2.53% 6.5 -0.1

6 AML Employees Welfare Trust 31-Mar-17 2.45% 6.3 0.0

7 Kotak Mahindra Asset Management Company Ltd. 28-Feb-17 2.27% 5.9 0.4

8 Sundaram Asset Management Company Limited 31-Mar-17 1.89% 4.9 0.0

9 Lalbhai Group 31-Mar-17 1.60% 4.1 0.0

10 Reliance Nippon Life Asset Management Limited 28-Feb-17 1.41% 3.6 0.0

(in %) Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Promoter 43.8 43.8 43.8 43.8 43.1

FII 22.6 22.9 22.5 22.6 24.8

DII 16.4 16.1 16.2 16.4 15.3

Others 17.2 17.2 17.5 17.2 16.8

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

Dimensional Fund Advisors, L.P. 25.6 4.5 Norges Bank Investment Management (NBIM) -13.9 -2.7

Avadh Material And Equipment Suppliers Pvt. Ltd. 4.9 0.8 Aura Securities Pvt. Ltd. -11.0 -1.8

Kotak Mahindra Asset Management Company Ltd. 2.4 0.4 Lalbhai (Sanjaybhai Shrenikbhai) -4.9 -0.8

BlackRock Asset Management North Asia Limited 1.8 0.3 Amundi Hong Kong Limited -2.8 -0.5

Jyske Invest Fund Management A/S 1.3 0.2 Shah (Jayesh Mohanlal) -2.8 -0.5

BUY SELL

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17E 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 4,732.3 5,240.0

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 12.7 14.4

Total Operating Expenditure 7,059.5 8,292.2 9,393.3 10,485.3

EBITDA 951.1 943.4 1,122.9 1,356.4

Growth (%) (0.8) 19.0 20.8

Depreciation 240.5 297.1 312.6 338.5

Interest 358.6 288.4 280.3 270.0

Other Income 82.1 78.0 81.9 86.0

PBT 434.0 435.9 611.9 833.8

Growth (%) (13.0) 0.4 40.4 36.3

Total Tax 124.6 99.7 150.5 206.0

PAT (adj. exceptional gains/loss) 316.1 320.1 451.4 617.9

Growth (%) (7.3) 1.2 41.0 36.9

EPS (|) 12.3 12.4 17.5 23.9


Cash flow statement | Crore


Profit before Tax 435.4 417.8 601.9 823.8

Add: Depreciation 240.5 297.1 312.6 338.5

(Inc)/dec in Current Assets 910.1 (418.2) 33.3 (538.1)

Inc/(dec) in CL and Provisions 94.2 100.4 90.5 218.5

Taxes Paid (124.6) (99.7) (150.5) (206.0)

Interest on borrowings 358.6 288.4 280.3 270.0

CF from operating activities 1,914.2 585.9 1,168.2 906.9

(Inc)/dec in Investments (366.7) 147.1 (27.7) (30.4)

(Inc)/dec in Fixed Assets (369.4) (443.8) (451.6) (519.2)

(Inc)/dec in Intangible Assets 185.2 (33.5) (8.9) (9.5)

Others (2.7) 2.6 39.0 -

CF from investing activities (553.5) (327.6) (449.2) (559.1)

Issue/(Buy back) of Equity - 0.1 (0.1) -

Inc/(dec) in loan funds 91.2 (666.3) (100.0) (100.0)

Dividend paid & dividend tax 94.8 94.9 94.8 94.8

Interest paid & Others (1,569.2) 306.0 (691.2) (306.6)

CF from financing activities (1,383.1) (265.3) (696.5) (311.8)

Net Cash flow (22.4) (7.0) 22.5 36.0

Opening Cash 83.3 60.9 53.9 76.4

Closing Cash 60.9 53.9 76.4 112.5


Balance sheet | Crore


Liabilities

Equity Capital 258.2 258.4 258.2 258.2

Reserve and Surplus 2,388.2 3,309.8 3,320.3 3,868.3

Total Shareholders funds 2,646.4 3,568.2 3,578.6 4,126.6

Total Debt 3,487.9 2,821.6 2,721.6 2,621.6

Deferred Tax Liability (124.0) (144.1) 47.1 47.1

Minority Interest / Others 123.5 231.9 165.0 172.0

Total Liabilities 6,133.8 6,477.5 6,512.2 6,967.2

Assets

Net Block 3,410.0 3,523.8 3,556.0 3,703.5

Capital WIP 98.3 95.7 56.7 56.7

Intangible WIP - - 4.4 4.4

Total Fixed Assets 3,508.2 3,619.5 3,612.7 3,760.2

Investments 423.8 276.7 304.3 334.8

Inventory 1,920.5 2,382.8 2,247.3 2,660.3

Debtors 768.2 813.9 1,382.9 1,622.2

Loans and Advances 331.3 164.6 181.0 217.3

Other Current Assets 594.6 902.3 474.4 284.7

Cash 60.9 53.9 76.4 112.5

Total Current Assets 3,675.4 4,317.5 4,362.1 4,896.9

Trade Payables 1,214.2 1,478.8 1,517.6 1,685.5

Provisions 56.3 57.5 66.2 69.5

Other Current Liabilities 203.1 199.8 187.5 274.2

Total Current Liabilities 1,473.6 1,736.2 1,771.3 2,029.1

Net Current Assets 2,201.8 2,581.3 2,590.8 2,867.8

Application of Funds 6,133.8 6,477.5 6,512.2 6,967.2


Key ratios


Per share data (|)

EPS 12.3 12.4 17.5 23.9

Cash EPS 21.6 23.9 29.6 37.0

BV 102.5 138.1 138.6 159.8

DPS 3.1 3.1 3.1 3.1

Cash Per Share 2.4 2.1 3.0 4.4

Operating Ratios

EBITDA Margin (%) 11.9 10.2 10.7 11.5

PBT Margin (%) 5.4 4.5 5.7 7.0

PAT Margin (%) 3.9 3.4 4.3 5.2

Inventory days 87.5 94.2 78.0 82.0

Debtor days 35.0 32.2 48.0 50.0

Creditor days 55.3 58.4 52.7 52.0

Return Ratios (%)

RoE 11.9 9.0 12.6 15.0

RoCE 11.6 10.1 12.9 15.1

RoIC 12.8 10.8 13.8 16.3

Valuation Ratios (x)

P/E 32.3 31.9 22.6 16.5

EV / EBITDA 14.4 13.8 11.5 9.4

EV / Net Sales 1.7 1.4 1.2 1.1

Market Cap / Sales 1.3 1.1 1.0 0.9

Price to Book Value 2.7 2.0 1.0 0.8

Solvency Ratios

Debt/EBITDA 3.7 3.0 2.4 1.9

Debt / Equity 1.3 0.8 0.8 0.6

Current Ratio 1.9 2.0 1.9 2.0

Quick Ratio 0.9 0.8 0.9 0.8



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

(KEWKIR)

1800 1844 Hold 2225 55.1 69.2 65.9 32.1 25.6 26.8 21.0 21.7 18.5 30.5 23.8 29.9 22.7 23.8 23.0

Page Industries

(PAGIND)

14849 12000 Sell 16722 175.7 208.5 252.8 82.2 69.3 57.2 50.9 42.9 35.9 57.8 61.0 59.5 50.7 46.0 45.6

Rupa & Company 386 310 Buy 3198 8.3 9.2 10.4 35.7 32.2 28.5 18.9 17.7 16.1 22.9 20.4 20.3 17.9 16.9 16.8

Vardhman Textiles (MAHSPI)1322 1275 Hold 7628 92.6 155.8 125.3 14.0 11.2 10.4 7.7 6.8 6.6 16.1 19.1 18.7 15.0 26.0 16.2

Arvind Ltd (ARVMIL) 400 480 Buy 10329 12.3 12.4 17.5 33.2 32.4 22.9 14.5 13.9 11.5 11.6 10.1 12.9 11.9 9.0 12.6

RoCE (%) RoE (%)

Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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

[email protected]


ANALYST CERTIFICATION

We /I, Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this

research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or wil l be directly or indirectly related to the specific

recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities

Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has

its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which

are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking

and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts

and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and

meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without

prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis under no obligation to update or keep the information current.

Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended

temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this

company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This

report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their

receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific

circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate

the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any

loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the

risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to

change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment

in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in

respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned

in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any

compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts

and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts of this report have not received any compensation from the companies mentioned in the

report in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month

preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject

company/companies mentioned in this report.

It is confirmed that Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities

described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and

to observe such restriction.

Arvind Ltd (ARVMIL) | 396static-news.moneycontrol.com/static-mcnews/2017/05/IDirect_Arvin… ·...

Documents

Transcript of Arvind Ltd (ARVMIL) | 396static-news.moneycontrol.com/static-mcnews/2017/05/IDirect_Arvin… ·...