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Textiles
ƒ Signs of revival
Cotton prices remained flat at | 39,000/candy at the end of Q2FY12.
During the quarter, prices fluctuated from | 30,000-40,000/candy. On the
back of the upcoming festive season, textile players are witnessing a
pick-up in demand and the piled up inventory is clearing. We expect
26% revenue growth for our textile universe, led by strong growth in
Alok Industries and Kewal Kiran Clothing.
ƒ Operating margin to dip YoY but remain flat sequentially
On the operating front, we expect a YoY dip for varied reasons.
However, on a sequential basis, we expect a flattish trend in operating
margins. Vardhman Textiles, which enjoyed a bumper FY11 where
margins touched an all-time high of 29.7%, is likely to retrace back to
the range of 15-18% as prices have corrected from peak levels.
ƒ Manmade fibre players: Q2FY12E - a better quarter sequentially
Prices of key raw materials and end products held well during Q2FY12.
Prices of PTA and MEG (key raw materials) increased by ~4% and
~11%, respectively, while prices of chips and polyester oriented yarn
increased by 4.5% and 1.1%, respectively. With a sharp correction in
cotton prices since April 2011, prices of manmade fibres are also falling
Company specific view
Company Remarks
Alok Industries We expect 35% YoY revenue growth backed by increased capacities and the recent
rupee depreciation. EBITDA margin is likely to dip 140 bps YoY to 27.2% due to cost
pressures and higher share of the polyester business. Due to higher fixed costs, we
expect muted PAT growth of 5% (| 83.5 crore)
Bombay Rayon
Fashions
We expect 18% YoY sales growth to | 616.1 crore. We expect volumes in the
garment segment to remain flat at 10.3 million pieces (up 2.5% YoY) and in the fabric
segment to increase 22% YoY to 26.6 million metre. We expect garment realisations
of | 261/piece and fabric realisation of | 131/metre (up 15%)
JBF Industries We expect 26.4% YoY increase in revenues to | 1,782.9 crore on the back of
improved realisations. While volumes are likely to remain flat, a YoY increase in
realisations will boost consolidated revenues. We expect the company to maintain an
EBITDA margin of 10.5%
Kewal Kiran We expect KKCL to report a healthy 38% YoY growth in topline to | 100.5 crore led by
29% growth in the apparel segment and higher growth in the accessories segment
(albeit on a small base). We expect realisations to grow by 13% YoY to | 769 per
piece on the back of price hikes taken in Q1FY12
Vardhman
Textiles
Vardhman's Q2FY12E revenues are likely to increase 14% YoY to | 1,037.7 crore. We
believe the inventory pain was over in Q1FY12 itself. Hence, we expect Vardhman to
report an EBITDA margin of 14.9% in Q2FY12E, down from the abnormally high levels
of FY11 (due to superior realisations). (Q2FY11 - 24.4%)
Source: Company, ICICIdirect.com Research
Others
: Company Specific View (Q2FY12E)
Company Remarks
Everest Kanto We expect the company to sell 2.5 lakh cylinders with average realisations of | 9000
per cylinder. With the recovery in CNG cylinders sales and improvement in margins
in the last three quarters, we expect strong volume growth and margins for the
company to remain sustainable
InfoEdge On the back of sustained hiring across the board, revenues are expected to grow
29.8% YoY. However, with higher spend on marketing and promotional activities,
margins are expected to remain under pressure
Nitin Fire With the rising sales of fire fighting equipment and industrial cylinders sales, we
believe the company would post robust revenues and earnings growth in the quarter.
We expect the company to sell 2.8 cylinders with average realisations of | 8400 per
cylinders
Orbit Corporation We expect pre-sales volumes to remain weak during Q2FY12 given that lower
offtakes in Mumbai Orbit's revenue is expected to witness a decline of 3% QoQ on
account of slower execution across projects in Mumbai. Key monitorable: pre-sales
volume, execution pick up, sales collection & debt level
Praj Industries The company's order book growing to | 850 crore from | 750 crore in the previous
quarter, had led to the strong growth in revenues. However, margins for the company
have still remained subdued due to lower engineering income. We believe the current
high ethanol demand would continue to drive growth for the company
Source: Company, ICICIdirect.com Research
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