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Textiles
Global supply deficit leads to higher cotton prices
We expect our textile universe to post 31% YoY revenue growth in
Q4FY11E on the back of strong cotton and yarn prices, which led to
enhanced realisations. Global cotton prices touched a historical high
of $2.2/lbs (pound) in February 2011 while domestic prices crossed
| 170/kg in March 2011 on the back of a global deficit due to
curtailed exports from India and robust global demand. During the
quarter, domestic cotton prices increased by 28%.
Operating margin woes; tactfully handled by some players
Higher cotton prices and increased labour costs have led to margin
pressures for textile players. Yarn manufacturers are likely to face
margin compression due to higher cotton prices. Among apparel
manufacturers, we expect Bombay Rayon to face marginal pressure
while Kewal Kiran is likely to maintain its margins due to price hikes
taken by them.
Manmade fibre players continue to gain
This was yet another strong quarter for the manmade fibre industry.
Despite rising PTA and MEG prices, companies have enjoyed ~30%
higher realisations and were also comfortably able to pass on the
impact of the input price hike.
Company specific view
Alok
Industries
We expect Alok to enjoy the benefits of expanded capacities and increased realisations
and foresee a 35% topline growth to | 1,986 crore. However, we expect a 300 bps
sequential dip in operating margins to 26% owing to a steep rise in cotton costs and
increased employee expenses
Bombay
Rayon
Fashions
BRFL is expected to continue its topline growth trajectory and report yet another quarter
of improved sales (up 20% YoY). We expect realisations to improve by 2% QoQ to |
275/piece. Due to increasing cotton costs, we expect a 120 bps margin compression
sequentially
JBF
Industries
We expect JBF's topline to increase by 22% YoY to | 891 crore on the back of ~30% YoY
increase in realisations. Despite a 30% QoQ increase in PTA and MEG prices, we expect a
marginal YoY increase in the EBITDA margin to 9.8% as JBF has been able to pass on the
impact of increased input costs completely
Kewal Kiran We expect sales of | 59 crore in Q4FY11E backed by 15% volume and 11% value growth.
Sales are likely to dip marginally QoQ as business was affected in March due to strikes
(opposing imposition of excise duty). Operating margins are likely to be maintained at
28% as it was able to pass on the cost inflation
Vardhman
Textiles
Vardhman's Q4FY11E topline is expected to increase by 41% YoY and 6% QoQ on the back
of firm cotton and yarn prices. On the operating margin front, we expect a QoQ dip of 360
bps as the impact of higher cotton prices will be felt in this quarter
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Textiles
Global supply deficit leads to higher cotton prices
We expect our textile universe to post 31% YoY revenue growth in
Q4FY11E on the back of strong cotton and yarn prices, which led to
enhanced realisations. Global cotton prices touched a historical high
of $2.2/lbs (pound) in February 2011 while domestic prices crossed
| 170/kg in March 2011 on the back of a global deficit due to
curtailed exports from India and robust global demand. During the
quarter, domestic cotton prices increased by 28%.
Operating margin woes; tactfully handled by some players
Higher cotton prices and increased labour costs have led to margin
pressures for textile players. Yarn manufacturers are likely to face
margin compression due to higher cotton prices. Among apparel
manufacturers, we expect Bombay Rayon to face marginal pressure
while Kewal Kiran is likely to maintain its margins due to price hikes
taken by them.
Manmade fibre players continue to gain
This was yet another strong quarter for the manmade fibre industry.
Despite rising PTA and MEG prices, companies have enjoyed ~30%
higher realisations and were also comfortably able to pass on the
impact of the input price hike.
Company specific view
Alok
Industries
We expect Alok to enjoy the benefits of expanded capacities and increased realisations
and foresee a 35% topline growth to | 1,986 crore. However, we expect a 300 bps
sequential dip in operating margins to 26% owing to a steep rise in cotton costs and
increased employee expenses
Bombay
Rayon
Fashions
BRFL is expected to continue its topline growth trajectory and report yet another quarter
of improved sales (up 20% YoY). We expect realisations to improve by 2% QoQ to |
275/piece. Due to increasing cotton costs, we expect a 120 bps margin compression
sequentially
JBF
Industries
We expect JBF's topline to increase by 22% YoY to | 891 crore on the back of ~30% YoY
increase in realisations. Despite a 30% QoQ increase in PTA and MEG prices, we expect a
marginal YoY increase in the EBITDA margin to 9.8% as JBF has been able to pass on the
impact of increased input costs completely
Kewal Kiran We expect sales of | 59 crore in Q4FY11E backed by 15% volume and 11% value growth.
Sales are likely to dip marginally QoQ as business was affected in March due to strikes
(opposing imposition of excise duty). Operating margins are likely to be maintained at
28% as it was able to pass on the cost inflation
Vardhman
Textiles
Vardhman's Q4FY11E topline is expected to increase by 41% YoY and 6% QoQ on the back
of firm cotton and yarn prices. On the operating margin front, we expect a QoQ dip of 360
bps as the impact of higher cotton prices will be felt in this quarter
Source: Company, ICICIdirect.com Research
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