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Textile
We expect the textile universe to post a healthy 46.5% YoY growth in
topline to | 3,134 crore. EBITDA margins are likely to be under pressure at
22% (against 23.8% in Q2FY11) for downstream players.
ƒ Sustained growth
Cotton and cotton yarn prices continued their upward march in
Q3FY11 as well. Cotton prices touched a record | 45,000 per candy
(| 125/kg). Consequently, yarn prices followed suit. In early
December, the government intervened and banned cotton yarn
exports so as to curb the unprecedented hike in prices. This move
could impact revenue growth in Q4FY11. We believe textile
companies will post a healthy revenue growth in Q3FY11 on the
back of increased demand due to the festive season.
ƒ Margins to remain cushioned by low cost inventory
Though cotton and cotton yarn prices have been on the rise we do
not expect much pressure on the operating margins for spinning
companies due to (a) the ability to pass on increased input costs and
(b) low cost inventory held by the companies.
ƒ Increased blending to boost demand for manmade fibres
The ratio of cotton yarn price and polyester filament yarn (PFY)
price has gone up from 1.4x to 1.6x during 2002-09 to a historical
high of 2.3x in September 2010. Consequently, we expect a pick-up
in the demand for blended yarn, which will lead to an increase in
demand for manmade fibres.
Alok
Industries
We expect a 30% YoY growth in revenues backed by strong appreciation in cotton
prices, which has led to an increase in yarn prices. On the margin front, we expect
Alok to be able to maintain its margins (at ~28%) for the quarter under review as it
would benefit from the low cost inventory held by it
Bombay
Rayon
Fashions
We expect Bombay Rayon to continue its growth trajectory and report yet another set
of good numbers. We expect a YoY and QoQ topline growth of 34% and 7%,
respectively. We expect volume driven growth this quarter and expect EBITDA margins
to moderate to 27% owing to a steep increase in cotton and yarn prices
JBF
Industries
We expect JBF to report 22% YoY growth in topline on the back of increased
realisations across the board. Input costs have also gone up simultaneously. Hence,
we expect JBF to maintain EBITDA margins at 11.4% (as against 11.5% in Q3FY10)
Kewal Kiran On the back of a delayed festive season and buoyancy in the economy, we expect 48%
YoY growth in revenues led by 35% YoY volume growth and 11% YoY value growth. We
expect realisations per piece to increase from |655 a piece in Q2FY10 to | ~730 a
piece
Everest Kanto We expect the company to sell ~2.0 lakh cylinders with average realisation of |
8000 per cylinders. With sustained volumes, stable realisations and lower raw
material cost, we believe margins for the company will expand to 29% from 20% in
Q2FY11
InfoEdge On the back of an improvement in hiring activity across the board, revenues are
expected to grow 24.6% YoY. Jeevan Saathi is expected to post a loss at the PAT
level due to renewed investment. Margins are expected to improve by 110 bps YoY
Nitin Fire We expect the company to sell 70,000 CNG cylinders with average realisations of |
7500 per cylinders, contributing 55% to the topline. With crude prices rising to
~US$90 per barrel, volumes from CNG cylinders will improve, going forward
Orbit
Corporation
We expect strong pre-sales volumes in Q3FY11 led by pre-sales offtake from Orbit
Enclave and Mandwah projects. Orbit’s revenues are expected to grow at 13.5% YoY
in Q3FY11 post the heavy monsoon, which had dented execution last quarter. Key
monitorable: Pre-sales volume, execution pick up
Praj
Industries
With the order book shrinking to | 600 crore, slow execution of orders would
continue to haunt the topline growth. We believe lower sales from the engineering
segment would result in a contraction in margins from 22% in Q3FY10 to 13% in
Q3FY11
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