February 2, 2018 Arvind Ltd (ARVMIL) |...

February 2, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

Sustained profitability in B&R segment…

Revenues for the quarter grew 16% YoY to | 2705.8 crore (I-direct

estimate: | 2584.1 crore). Growth was accelerated by higher growth in

the brand & retail segment, which grew 24% YoY (mainly due to

inclusion of Tommy Hilfiger & Calvin Klein in the consolidated

numbers due to Ind-As)

Increase in raw material expense negatively impacted gross margins

to the extent of 444 bps YoY to 51.3%. Positive operating leverage

(employee & other expenses as a percentage of sales down 49 bps,

300 bps YoY, respectively), curtailed the operating margin contraction,

to a certain extent. The resultant EBITDA margins declined 90 bps YoY

to 9.2% (I-direct estimate: 9.7%). Subsequently, absolute EBITDA

grew 5.3% YoY to | 248.4 crore (I-direct estimate: | 250.3 crore)

Negative impact of higher depreciation (up 27% YoY) was completely

negated by lower tax rate (12.5% in Q3FY18 vs. 27.1% in Q3FY17).

Reported PAT was impacted by exceptional expense of | 10.6 crore

pertaining to retrenchment, post which PAT was at | 79.1 crore. Still,

adjusted PAT was at | 89.6 crore (I-direct estimate: | 89.5 crore)

Momentum for B&R segment slows down but profitability improves

Revenues from the brand & retail (B&R) segment grew 24% YoY to | 957.6

crore mainly due to inclusion of Tommy Hilfiger & Calvin Klein in the

consolidated numbers due to Ind-As. Excluding the same, the revenue

growth for the base portfolio was at 9.5% YoY (GST adjusted growth

15%) to | 837 crore. ‘Power brands’ continued to report decent like-to-like

sales (LTL) sales growth of 7.9%, ‘Unlimited’ registered negative LTL sales

growth of 27% mainly on account of a very high base effect of last year.

Profitability for the B&R segment improved significantly with EBITDA

more than doubling from | 30 crore in Q3FY17 to | 67 crore in Q3FY18.

EBITDA margins for the quarter improved 350 bps YoY to 7% while

excluding (TH & CK) margins came in at 8.2% vs. 4.4% in Q3FY17. The

management highlighted that most emerging brands are expected to

breakeven by Q4FY18 and turn positive by FY19.

Macroeconomic challenges impact textiles performance

Constant rupee appreciation and a reduction in duty drawbacks continued

to hamper the performance of the textile division. Revenues for the textile

division grew 9% YoY to | 1540 crore. Growth was mainly accelerated by

16% growth in the garmenting segment to | 319 crore. Arvind has

commenced its operations for the Phase II garmenting expansion in

Ethiopia and expects to reach high single digit margin in FY19. Volume

for denims came in at 25 million pieces (up 14%) while realisations

declined sharply by 7% YoY to | 181/piece. EBITDA margins for the

textile division declined significantly by 330 bps YoY to 14%. Arvind has

charted out a | 1500 capex outlay mainly towards garmenting and

technical textile division that will drive the next leg of growth, going

forward.

Fundamentals remain intact; maintain BUY!

With de-merger on the cards, we believe Arvind would be able to

efficiently channelise its resources to full potential leading optimised

results in the long term. Going forward, we expect Arvind to clock sales,

PAT CAGR of 13.2%, 24.2%, respectively, in FY17-19E. We value textiles

at 6.5x EV/EBITDA and B&R at 2.0x MCap/sales. We maintain BUY rating

on the stock with a target price of | 480.

Arvind Ltd (ARVMIL) | 383

Rating matrix

Rating : Buy

Target : | 480

Target Period : 12 months

Potential Upside : 25%

What’s changed?

Target Unchanged

EPS FY18E Changed from | 14.0 to | 13.5

EPS FY19E Unchanged

Rating Unchanged

Quarterly performance

| Crore Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)

Revenue 9,900.1 2,335.5 323.9 2,628.5 276.7

EBITDA (0.1) 237.0 (100.0) 212.3 (100.0)

EBITDA (%) (0.0) 10.1 -1015 bps 8.1 -808 bps

PAT 79.1 75.5 4.8 64.5 22.6

Key financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 8,011 9,236 10,508 11,829

EBITDA 951 943 1,014 1,203

Net Profit 316.1 320.1 349.0 494.0

EPS (|) 12.3 12.4 13.5 19.1

Valuation summary

FY16 FY17 FY18E FY19E

P/E (x) 31.3 30.9 28.3 20.0

Target P/E (x) 28.5 28.2 25.9 18.3

EV/EBITDA (x) 14.4 13.6 12.5 10.5

P / BV (x) 3.7 2.8 2.6 2.4

RONW (%) 11.9 9.0 9.3 11.8

ROCE (%) 11.0 9.9 10.5 12.3

Stock data

Particular Amount

Market Capitalization (| Crore) 9,895.2

Total Debt (FY17) (| Crore) 2,965.6

Cash (FY17) (| Crore) 53.9

EV (| Crore) 12,806.9

52 week H/L 478 / 353

Equity Capital (| Crore) 258.4

Face Value (|) 10.0

Peer Comparison

1M 3M 6M 12M

Raymond (3.24) 5.83 29.13 104.67

Arvind Ltd (9.05) 0.78 11.05 7.84

K P R Mill Ltd (7.50) (4.22) (6.25) 28.02

Kewal Kir.Cloth. (11.71) (9.61) 0.54 (0.51)

Research Analyst

Bharat Chhoda

[email protected]

Ankit Panchmatia

[email protected]

Cheragh Sidhwa

[email protected]


Variance analysis

| crore Q3FY18 Q3FY18E Q3FY17 YoY (%) Q2FY18 QoQ (%) Comments

Revenue 2,705.8 2,584.1 2,335.5 15.9 2,628.5 2.9 LTL: Power brands (+) 8%: Unlimited: (-)4%

RM Cost 1,318.4 1,162.9 1,034.4 27.5 1,280.1 3.0 Rupee appreciation resulted in lower gross margins

Employee Benefit Expenses 320.5 331.2 288.0 11.3 328.7 -2.5

Other Expenditure 818.5 669.3 777.2 5.3 807.5 1.4

Total Expense 2,457.3 2,333.9 2,099.5 17.0 2,416.2 1.7

EBITDA 248.4 250.3 235.9 5.3 212.3 17.0

EBITDA Margin (%) 9.2 9.7 10.1 -92 bps 8.1 111 bps

Depreciation 93.3 86.7 73.4 27.2 83.3 12.0

Interest 67.1 63.2 67.6 -0.8 62.0 8.3

Other Income 12.2 23.6 10.9 12.0 25.6 -52.2

PBT 100.3 124.1 105.9 -5.3 92.6 8.3

Total Tax 11.2 31.8 28.0 -59.9 23.6 -52.5

Exceptional Item -10.6 -6.2 -2.7 NM -4.5 136.5 Exceptional expenses on account of retrenchment related compensation

Reported PAT (Incld Minority Int) 79.1 89.5 73.2 8.0 64.5 22.6

Key Metrics Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)

Textiles 1,534.4 1,402.2 9.4 1,437.6 6.7 Growth was mainly due to 16% growth in the garments business

Brand & Retail 957.6 764.5 25.3 1,032.4 -7.2 Adjusting for GST impact, growth would have been higher by 5%

Arvind Internet 1.8 4.7 -61.4 1.9 -1.6

Others 222.7 175.2 27.1 179.2 24.2

Less: Intersegment 10.8 11.2 -3.0 22.7 -52.2

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) % Change Old New % Change Old New % Change Comments

Revenue 9,235.5 2.4 10,507.5 10,507.5 0.0 11,829.2 11,829.2 0.0 Continue to maintain revenue growth estimates

EBITDA 943.4 -20.1 1,013.9 1,013.9 0.0 1,203.4 1,203.4 0.0

EBITDA Margin (%) 10.2 -287 bps 9.6 9.6 0 bps 10.2 10.2 0 bps

PAT 320.1 -19.7 360.2 349.0 -3.1 494.0 494.0 0.0

EPS (|) 12.4 -19.7 14.0 13.5 -3.1 19.1 19.1 0.0 EPS revised downwards for FY18E owing to exceptional expense

FY18E

FY17

FY19E



Details of de-merger

Arvind currently operates different businesses under divisions and

subsidiaries. As on FY17, Arvind has 22 subsidiaries (direct or indirect)

and five joint venture companies.

Exhibit 1: Consolidated structure to be divided in three independent listed companies…

Sr. No Name of the Company Subsidiary %

1 The Anup Engineering Limited Subsidiary 93.5

2 Arvind Lifestyle Brands Limited Subsidiary 100.0

3 Syntel Telecom Limited Subsidiary 100.0

4 Arvind Brands and Retail Limited Subsidiary 100.0

5 Arvind PD Composites Private Limited Subsidiary 51.0

6 Arvind Envisol Limited Subsidiary 100.0

7 Arvind Goodhill Suit Manufacturing Private Limited Subsidiary 51.0

8 Arvind OG Nonwovens Private Limited Subsidiary 74.0

9 Dholka Textile Park Private Limited Subsidiary 100.0

10 Arvind Garments Park Private Limited Subsidiary 100.0

11 Arvind Internet Limited Subsidiary 100.0

12 Arvind Beauty Brands Retail Private Limited Subsidiary 100.0

13 Arvind Foundation Subsidiary 100.0

14 Arvind Fashions Limited Subsidiary 89.7

15 Arvind Ruf & Tuf Private Limited Subsidiary 100.0

16 Arvind Premium Retail Limited Subsidiary 51.0

17 Arvind True Blue Limited Subsidiary 87.5

18 Arvind Worldwide Inc., USA Subsidiary 100.0

19 Arvind Textile Mills Limited, Bangladesh Subsidiary 100.0

20 Arvind Niloy Exports Private Limited, Bangladesh Subsidiary 70.0

21 Arvind Lifestyle Apparel Manufacturing PLC, Ethopia Subsidiary 100.0

22 Westech Advanced Materials Limited, Canada Subsidiary 51.0

23 Arya Omnitalk Wireless Solutions Private Limited Associate (JV) 50.0

24 Tommy Hilfiger Arvind Fashion Private Limited Associate (JV) 50.0

25 Arya Omnitalk Radio Trunking Services Private Limited Associate (JV) 50.0

26 Arudrama Developments Private Limited Associate (JV) 50.0

27 Calvin Klein Arvind Fashion Private Limited Associate (JV) 49.0

JV/Associate

Subsidiaries

Source: ICICIdirect.com Research, Entities to be impacted on de-merger

Exhibit 2: Consolidated structure to be divided in three independent listed companies…

Source: ICICIdirect.com Research

The de-merger would result in three independent listed entities. The

textile business, which includes denim, wovens, garments, technical

textiles, etc, would continue to be a part of Arvind Ltd. The branded

apparel business, which includes 15 brands (Tommy Hilfiger, USPolo,

Arrow, Flying Machine, Gap, Aeropostale, The Children Place (TCP),

Sephora, etc.) will be de-merged into Arvind Fashion (AFL). The

consideration would be one share of AFL for every five existing Arvind

shares. In addition to AFL shares, the engineering division (including

Anup and recently formed Anveshan) would also be de-merged. Anup

would be merged with Anveshan while the renamed listed entity would

be Anup Engineering. The consideration would be one share of Anup for

every 27 existing Arvind shares.


Key indicators of independent entities…

Exhibit 3: Key indicators of de-merged entities…

Particulars Arvind Ltd.

Arvind

Fashions Ltd.

Anup Engineering

Limited

FY17 Revenue (in crs)

(CAGR)

| 6158 crore

(13%)

| 2898 crore

(25%*)

| 179 crore

(25%)

FY17 EBITDA (in crs)

(CAGR)

| 819 crore

(5%)

| 145 crore

(~34%)

| 54 crore

(47%)

EBITDA Margin 13.3% 5.0% 30.0%

RoCE

(FY17)

11.9% 3.7% 43.3%

Net Debt as on Q2FY18 | 2792 crore | 696 crore Net Cash of | 36 crore

Shareholders Equity

as on Q2FY18

~| 2600 crore | 1108 crore | 179 crore


Key conference call takeaways…

A reduction in duty drawback rates and rupee appreciation negatively

impacted the margins of the textiles division this quarter

For the brands & retail division, revenues from the wholesale division

continued to remain under pressure (post GST implementation), while

retail channel sales performed reasonably well

Unlimited registered negative LTL growth albeit on a high base of

demonetisation (27% LTL growth in Q3FY17). However, margins

improved significantly for the quarter

Emerging brands are expected to breakeven by Q4FY18 while it is

expected to turn positive in the next financial year

Increase in debt can be mainly attributed to stretched working capital

requirements on account of delay in getting input credit refunds and

15-20 days delay in receivables owing to weak sentiments in the

wholesale channel

The management has guided for consolidated revenue growth of 11-

12% (including TH & CK: 15-16%). Revenue growth for the textile

division is expected to be 6-7% with B&R growing 15-17% (excluding

TH & CK)

Gross debt as on December 31, 2017 was at | 3500 crore while the

company intends to reduce it by | 100 crore by Q4FY18

Exhibit 4: Targeted revenues - Arvind textile business

Revenues (in crs.)

46844958 5069

5453

2999

9000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

FY14

FY15

FY16

FY17

H1FY18

FY22

10% - 12% CAGR


Exhibit 5: Targeted revenues - Arvind Fashion

Revenues (in crs.)

19152361

27402302

1818

9000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

FY14

FY15

FY16

FY17

H1FY18

FY22

22% - 24% CAGR



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 6: 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.


Exhibit 7: Revenue trend

7851

1877 1957 2034 2233

8011

2104 2331 2335 2409

9236

2475 2628 2706

10508

11829

0

2000

4000

6000

8000

10000

12000

14000

FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17

Q1FY18

Q2FY18

Q3FY18

FY18E

FY19E

| c

rore


Exhibit 8: EBITDA and EBITDA margin trend

1013

228260 258 260

951

244 232 236 224

943

207 212248

1014

1203

0

200

400

600

800

1000

1200

1400

FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17

Q1FY18

Q2FY18

Q3FY18

FY18E

FY19E

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

EBITDA EBITDA Margin


Exhibit 9: EBITDA and EBITDA margin trend

436

248

354

91 93109

48

341

5871

90 98

316

73 77 7397

320

57 6479

349

494

0

100

200

300

400

500

600

FY12

FY13

FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17

Q1FY18

Q2FY18

Q3FY18

FY18E

FY19E



Valuation

Given investments, standalone business to be re-rated at 6.5x

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 and textile capabilities were insignificant. With the

recent demerger, the investments in expansion of its intention to double

its garmenting capacity to a targeted 40 million pieces by 2020. Further,

currently only 7% of fabrics produced are used for production of

garments that the company intends to increase to 25% by 2020 and 50%

by 2022. 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.

The renewed focus on the cash gusher segment commands a re-rating on

the textile business. We value the standalone business on the basis of

EV/EBITDA and assign an industry average EV/EBITDA multiple of 6.5x

FY19E arriving at a targeted market capitalisation of | 3100 crore and

SOTP value of | 120/share.

Exhibit 10: Valuing standalone business….

SOTP

Arvind Standalone & other businesses

Target EV/EBITDA (x) 6.5

EBITDA (FY19E) (| Crore) 832.6

Net Debt (| Crore) 2,274.5

Enterprise Value (| Crore) 5,378.7

Target Market cap Core business (| crore) 3,104.2

Value/Share 120


Anup valued at 5x EV/EBITDA…

We value Anup Engineering at 5x EV/EBITDA which could result a

targeted market capitalisation of | 270 crore post listing, ascribing a per

share value of | 10/share.


Brands & retail business – stability to remain crucial…

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.

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 powerbrands 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 2x and arrive at a value of | 350 per

share with a target market capitalisation of | 9025 crore.

Exhibit 11: Valuing brands & retail business….

SOTP

Arvind Lifestyle & Brands

Target Market Cap/Sales (x) 2.0

Sales (FY19E) 4,593

Market Capitalization (FY19E) 9,025.2

No. of Shares 25.8

Price target (|) 350


Consolidated valuation

Applying the EV/EBITDA multiple of 6.5x to its standalone business

(| 120/share) and market capitalisation to sales multiple of 2x to its brands

& retail business (| 350/share) and Anup Engineering at 5x EV/EBITDA

(| 10/share), we continue to maintain our consolidated target price of

| 480/share with a BUY recommendation on the stock.


Recommendation history vs. Consensus

20

70

120

170

220

270

320

370

420

470

520

Feb-18

Dec-17

Nov-17

Sep-17

Jul-17

Jun-17

Apr-17

Mar-17

Jan-17

Dec-16

Oct-16

Sep-16

Jul-16

Jun-16

Apr-16

Feb-16

Jan-16

Nov-15

Oct-15

Aug-15

Jul-15

May-15

Mar-15

Feb-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. 30-Sep-17 36.95% 95.6 0.0

2 Nordea Funds Oy 31-Oct-17 3.49% 9.0 0.5

3 Life Insurance Corporation of India 30-Sep-17 3.26% 8.4 0.0

4 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Jun-17 2.68% 6.9 0.2

5 AML Employees Welfare Trust 30-Sep-17 2.45% 6.3 0.0

6 Kotak Mahindra Asset Management Company Ltd. 31-Dec-17 2.32% 6.0 0.0

7 Dimensional Fund Advisors, L.P. 31-Dec-17 2.32% 6.0 -0.4

8 Sundaram Asset Management Company Limited 31-Dec-17 2.06% 5.3 0.1

9 Multiples Alternate Asset Management Private Limited 30-Sep-17 1.91% 4.9 0.0

10 Reliance Nippon Life Asset Management Limited 31-Dec-17 1.70% 4.4 0.0

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

Promoter 43.8 43.1 42.9 42.9 42.9

FII 22.6 24.8 25.9 27.1 27.1

DII 16.4 15.3 13.8 14.1 13.8

Others 17.2 16.8 17.3 15.9 16.2

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

Nordea Funds Oy 3.1 0.5 Baillie Gifford & Co. -2.7 -0.4

Franklin Templeton Asset Management (India) Pvt. Ltd. 1.1 0.2 Dimensional Fund Advisors, L.P. -2.9 -0.4

Sundaram Asset Management Company Limited 1.0 0.1 Edelweiss Asset Management Ltd. -2.2 -0.3

UTI Asset Management Co. Ltd. 0.7 0.1 Jyske Invest Fund Management A/S -1.4 -0.2

HDFC Asset Management Co., Ltd. 0.5 0.1 Trilogy Global Advisors, LP -1.0 -0.2

BUY SELL

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17 FY18E FY19E

Total operating Income 8,010.6 9,235.5 10,507.5 11,829.2

Growth (%) 2.0 15.3 13.8 12.6

Raw Material Expenses 3,466.6 4,196.5 4,833.5 5,382.3

Employee Expenses 898.1 1,096.3 1,293.6 1,494.1

Manufacturing & Other Expenses 2,685.1 2,986.5 3,351.9 3,732.9

Project Expenses 9.7 12.9 14.6 16.5

Total Operating Expenditure 7,059.5 8,292.2 9,493.6 10,625.8

EBITDA 951.1 943.4 1,013.9 1,203.4

Growth (%) (0.8) 7.5 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 434.0 435.9 490.3 668.7

Growth (%) (13.0) 0.4 12.5 36.4

Total Tax 124.6 99.7 116.3 164.7

PAT (adj. exceptional gains/loss) 316.1 320.1 349.0 494.0

Growth (%) (7.3) 1.2 9.0 41.6

EPS (|) 12.3 12.4 13.5 19.1


Cash flow statement | Crore


Profit after Tax 316.1 320.1 349.0 494.0

Add: Depreciation 240.5 297.1 321.6 345.6

(Inc)/dec in Current Assets (308.8) (453.5) (84.9) (493.7)

Inc/(dec) in CL and Provisions 230.5 299.9 (30.4) 150.3

Others 0.2 - - -

CF from operating activities 478.5 463.5 555.3 496.3

(Inc)/dec in Investments (118.2) 147.8 (19.8) (20.8)

(Inc)/dec in Fixed Assets (572.1) (445.1) (246.3) (296.6)

(Inc)/dec in CWIP (2.9) 2.6 (19.1) (23.0)

Others - - - -

CF from investing activities (693.2) (294.8) (285.2) (340.4)

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

Inc/(dec) in loan funds 278.8 (853.2) (100.0) (100.0)

Others (73.0) 677.3 (165.3) (49.3)

CF from financing activities 205.9 (175.8) (265.4) (149.3)

Net Cash flow (8.8) (7.0) 4.7 6.6

Opening Cash 69.7 60.9 53.9 58.5

Closing Cash 60.9 53.9 58.5 65.2


Balance sheet | Crore


Liabilities

Equity Capital 258.2 258.4 258.2 258.2

Reserve and Surplus 2,388.2 3,309.8 3,493.1 3,937.5

Total Shareholders funds 2,646.4 3,568.2 3,751.4 4,195.7

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 6,624.7 6,969.4

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 2,303.0 2,592.7

Debtors 768.2 813.9 863.6 972.3

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 58.5 65.2

Total Current Assets 3,953.2 4,399.6 4,489.1 4,989.4

Trade Payables 1,214.2 1,478.8 1,402.7 1,509.6

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 2,023.4

Net Current Assets 2,349.5 2,496.1 2,616.0 2,966.0

Application of Funds 6,396.8 6,541.1 6,624.7 6,969.4


Key ratios


Per share data (|)

EPS 12.3 12.4 13.5 19.1

Cash EPS 21.6 23.9 26.0 32.5

BV 102.5 138.1 145.3 162.5

DPS 0.0 0.0 0.0 0.0

Cash Per Share 2.4 2.1 2.3 2.5

Operating Ratios

EBITDA Margin (%) 11.9 10.2 9.6 10.2

PBT Margin (%) 5.4 4.5 4.4 5.6

PAT Margin (%) 3.9 3.4 3.3 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 9.3 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 31.3 30.9 28.3 20.0

EV / EBITDA 14.4 13.6 12.5 10.5

EV / Net Sales 1.7 1.4 1.2 1.1

Market Cap / Sales 1.2 1.1 0.9 0.8

Price to Book Value 3.7 2.8 2.6 2.4

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



ICICIdirect.com coverage universe (Retail & Textile)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

Kewal Kiran Clothing 1672 2050 Buy 2093 69.2 69.0 81.3 22.0 21.5 18.6 4.5 4.6 4.1 23.8 21.4 22.1 23.8 21.1 21.9

Page Industries

(PAGIND)

20482 22920 Hold 22618 238.7 299.9 395.1 85.8 68.3 51.8 59.8 47.3 36.5 51.6 55.8 61.0 40.0 41.8 44.9

Rupa & Company 427 505 Buy 3409 9.1 10.6 13.6 47.1 40.2 31.3 25.1 22.3 17.8 23.6 25.0 28.9 16.4 17.5 20.0

Vardhman Textiles 1300 1440 Buy 7430 118.1 139.9 160.2 11.0 9.3 8.1 8.1 6.8 5.9 12.6 14.1 15.1 13.5 14.1 14.5

Arvind Ltd 383 480 Buy 9895 12.4 13.5 19.1 30.9 28.3 20.0 13.6 12.5 10.5 9.9 10.5 12.3 9.0 9.3 11.8

RoCE (%) RoE (%)

Sector / Company

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



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February 2, 2018 Arvind Ltd (ARVMIL) |...

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