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Textiles
Domestic textile companies take a breather
Cotton prices (domestic and international) have corrected ~40% to
| 38,000/candy in Q1FY12E. Consequently, buyers have halted
buying decisions and are awaiting price stability. Local spinners
have been affected by this as they are sitting on high cost inventory.
While newspaper articles reported under-utilisation of capacities to
avoid piling of inventory, fully integrated companies are operating at
optimal utilisation rates. We expect revenue growth for our textile
universe to be a subdued 7% YoY in Q1FY12E.
Operating margin to dip for varied reasons
While Alok Industries’ margin is likely to dip due to increased share
of polyester business (lower margin than cotton), Kewal Kiran is
likely to be hit by increased advertising expenses (IPL sponsorship).
Operating margin for our textile universe is likely to be dampened
due to a subdued demand scenario and high cost inventory held.
Manmade fibre players feeling the pain also
The manmade fibre industry is also feeling the pinch as realisations
are falling in line with declining cotton prices. Also, the ratio of
blended fabrics has started to come down (due to lower cotton
prices), thereby leading to inventory pile ups. Compared to a robust
FY11, we expect Q1FY12 to be a subdued quarter for these players
: Company specific view
Company Remarks
Alok
Industries
Alok Industries is likely to post 35% YoY revenue growth to | 1,483.6 crore as it will get
the full benefit of increased capacities. We expect the operating margin to dip by 60 bps
QoQ to 24.7% due to increased share of polyester (low margin) segment
Bombay
Rayon
Fashions
We expect a marginal YoY dip of 2% in BRFL's Q1FY12E revenues to | 493.1 crore due
to a 10% volume dip in the garments segment. However, we expect fabric volumes to
increase marginally (~2%) to 21.2 mn metre. We expect margins to dip by 130 bps YoY
to 24.2% due to input cost pressures
JBF
Industries
We expect an 8% decline in JBF's Q1FY12E revenues at | 1,293.4 crore led by ~12%
volume de-growth. The operating margin is also expected to be under pressure due to
lower offtake and rising input prices. JBF is likely to report an EBITDA margin of 10.1%
(as against 10.9% in Q1FY11 and 11.3% in Q4FY11)
Kewal Kiran KKCL is expected to report 23.2% YoY growth in revenues to | 56.0 crore due to a price
hike taken in Q1FY12, marginal volume growth and increased accessories sales. The
operating margin is likely to dip by 190 bps YoY and 250 bps QoQ due to increased
advertising expenses (IPL sponsorship)
Vardhman
Textiles
Lower cotton prices and reduced offtake are likely to affect Vardhman Textiles as well.
We expect a flat topline of | 812.1 crore in Q1FY12E. While the EBITDA margin is likely
to slip by 300 bps QoQ to 26.7%, we expect it to remain higher YoY as realisations are
still higher than those in Q1FY11
Source: Company, ICICIdirect.com Research
OTHERS::
Company specific view
Company Remarks
Everest Kanto We expect sales growth of ~53% to be led both by volume and value growth.
Cylinder sales volumes are expected to be ~2.5 lakh at an average realisation of
~| 9000/cylinder. Higher realisations and increasing demand in international
markets are expected to improve the margins to ~20%
InfoEdge On the back of sustained hiring across the board, revenues are expected to grow
23.3% YoY. However, with higher spend on marketing and promotional activities,
margins are expected to remain under pressure
Nitin Fire With the rising demand for CNG cylinders in the Dubai and Middle Eastern market,
the company is expected to witness higher revenues growth led by volume growth
as well as higher realisations. We expect margins to improve from 14.3% in Q1FY11
to 16.0%
Orbit
Corporation
We expect pre-sales volumes to remain weak during Q1FY12 due to lower offtake.
Orbit’s revenue is expected to witness muted growth of ~7% QoQ on account of
slower execution across projects in Mumbai. Key monitorable: Pre-sales volume,
execution pick up, sales collection & debtors and debt level
Praj
Industries
Led by the improvement in the order book to ~| 750 crore (as on March 31, 2011)
and increasing execution rate, we expect the company's revenues to witness
robust revenue growth of ~70%. Moreover, with ~60% of orders being from
international markets, margins are expected to be higher at ~19%
Ruchi Soya We expect 10% YoY growth in Q1FY12E. However, operating margins are likely to
be under pressure as due to the oversupply scenario in the industry. We expect
Ruchi Soya to report an EBITDA margin of 2.8% in Q1FY12E
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Textiles
Domestic textile companies take a breather
Cotton prices (domestic and international) have corrected ~40% to
| 38,000/candy in Q1FY12E. Consequently, buyers have halted
buying decisions and are awaiting price stability. Local spinners
have been affected by this as they are sitting on high cost inventory.
While newspaper articles reported under-utilisation of capacities to
avoid piling of inventory, fully integrated companies are operating at
optimal utilisation rates. We expect revenue growth for our textile
universe to be a subdued 7% YoY in Q1FY12E.
Operating margin to dip for varied reasons
While Alok Industries’ margin is likely to dip due to increased share
of polyester business (lower margin than cotton), Kewal Kiran is
likely to be hit by increased advertising expenses (IPL sponsorship).
Operating margin for our textile universe is likely to be dampened
due to a subdued demand scenario and high cost inventory held.
Manmade fibre players feeling the pain also
The manmade fibre industry is also feeling the pinch as realisations
are falling in line with declining cotton prices. Also, the ratio of
blended fabrics has started to come down (due to lower cotton
prices), thereby leading to inventory pile ups. Compared to a robust
FY11, we expect Q1FY12 to be a subdued quarter for these players
: Company specific view
Company Remarks
Alok
Industries
Alok Industries is likely to post 35% YoY revenue growth to | 1,483.6 crore as it will get
the full benefit of increased capacities. We expect the operating margin to dip by 60 bps
QoQ to 24.7% due to increased share of polyester (low margin) segment
Bombay
Rayon
Fashions
We expect a marginal YoY dip of 2% in BRFL's Q1FY12E revenues to | 493.1 crore due
to a 10% volume dip in the garments segment. However, we expect fabric volumes to
increase marginally (~2%) to 21.2 mn metre. We expect margins to dip by 130 bps YoY
to 24.2% due to input cost pressures
JBF
Industries
We expect an 8% decline in JBF's Q1FY12E revenues at | 1,293.4 crore led by ~12%
volume de-growth. The operating margin is also expected to be under pressure due to
lower offtake and rising input prices. JBF is likely to report an EBITDA margin of 10.1%
(as against 10.9% in Q1FY11 and 11.3% in Q4FY11)
Kewal Kiran KKCL is expected to report 23.2% YoY growth in revenues to | 56.0 crore due to a price
hike taken in Q1FY12, marginal volume growth and increased accessories sales. The
operating margin is likely to dip by 190 bps YoY and 250 bps QoQ due to increased
advertising expenses (IPL sponsorship)
Vardhman
Textiles
Lower cotton prices and reduced offtake are likely to affect Vardhman Textiles as well.
We expect a flat topline of | 812.1 crore in Q1FY12E. While the EBITDA margin is likely
to slip by 300 bps QoQ to 26.7%, we expect it to remain higher YoY as realisations are
still higher than those in Q1FY11
Source: Company, ICICIdirect.com Research
OTHERS::
Company specific view
Company Remarks
Everest Kanto We expect sales growth of ~53% to be led both by volume and value growth.
Cylinder sales volumes are expected to be ~2.5 lakh at an average realisation of
~| 9000/cylinder. Higher realisations and increasing demand in international
markets are expected to improve the margins to ~20%
InfoEdge On the back of sustained hiring across the board, revenues are expected to grow
23.3% YoY. However, with higher spend on marketing and promotional activities,
margins are expected to remain under pressure
Nitin Fire With the rising demand for CNG cylinders in the Dubai and Middle Eastern market,
the company is expected to witness higher revenues growth led by volume growth
as well as higher realisations. We expect margins to improve from 14.3% in Q1FY11
to 16.0%
Orbit
Corporation
We expect pre-sales volumes to remain weak during Q1FY12 due to lower offtake.
Orbit’s revenue is expected to witness muted growth of ~7% QoQ on account of
slower execution across projects in Mumbai. Key monitorable: Pre-sales volume,
execution pick up, sales collection & debtors and debt level
Praj
Industries
Led by the improvement in the order book to ~| 750 crore (as on March 31, 2011)
and increasing execution rate, we expect the company's revenues to witness
robust revenue growth of ~70%. Moreover, with ~60% of orders being from
international markets, margins are expected to be higher at ~19%
Ruchi Soya We expect 10% YoY growth in Q1FY12E. However, operating margins are likely to
be under pressure as due to the oversupply scenario in the industry. We expect
Ruchi Soya to report an EBITDA margin of 2.8% in Q1FY12E
Source: Company, ICICIdirect.com Research
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