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KPR Mills (KPR) reported a topline of INR3401mn as against our estimate
of INR3245mn, implying a growth of 30% YoY. The surge was primarily
driven by a strong growth in cotton yarn segment which grew 42.4% YoY
on higher exports. However, adjusted for MTM loss of INR122.4mn,
margins stood at 17.3% against our expectation of 17%, largely on
account of higher exports of cotton yarn.
Topline ahead of estimates
KPR reported a topline of INR3401mn ‐ higher than our estimates of INR3245mn ‐
marking a growth of 30% YoY primarily driven by a strong traction in cotton yarn
segment where exports went up from INR4.3mn in Q2FY11 to INR343.4mn in Q2FY12.
Adjusted for MTM loss of INR122.4mn, EBIDTA margin came in higher at 17.3% against
our expectation of 17%, essentially due to higher margins enjoyed by exports of cotton
yarn. Due to such higher margins and lower tax rate, the adjusted PAT came at
INR190mn against our expectation of INR175mn. KPR has completed 90% of its capex
for the new compact yarn and is expected to operate at full capacity utilization post
Dec 2011 (currently operating at 30%).
Sugar subsidiary to bring in self sufficiency in power
KPR has announced a strategic investment to foray into power and sugar by setting up
5000 TCD sugar plant along with a co‐generation capacity of 34MW. The company has
incorporated KPR Sugar Mills Ltd ‐ a wholly owned subsidiary of KPR Mills Ltd. The
total capex for the same is to the tune of INR3.25bn of which INR1.6bn will be utilized
for sugar plant and the remaining for power generation. This will help KPR attain 100%
self sufficiency in power needs. The management expects commercialization of the
plant in H2FY13 (Oct – Dec 2012). However, we have not factored in any revenues
from the sugar plant in our model.
Outlook and valuations: Worst behind us; maintain ‘HOLD’
With a sharp correction in cotton and yarn prices, we believe that the worst is over for
the company. However, we continue to remain cautious on the company’s new
venture into sugar and co‐generation segments. We value the company at 4x FY13E
EV/EBIDTA and arrive at a price of INR148 for the stock. We maintain our ‘HOLD’ rating
on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
KPR Mills (KPR) reported a topline of INR3401mn as against our estimate
of INR3245mn, implying a growth of 30% YoY. The surge was primarily
driven by a strong growth in cotton yarn segment which grew 42.4% YoY
on higher exports. However, adjusted for MTM loss of INR122.4mn,
margins stood at 17.3% against our expectation of 17%, largely on
account of higher exports of cotton yarn.
Topline ahead of estimates
KPR reported a topline of INR3401mn ‐ higher than our estimates of INR3245mn ‐
marking a growth of 30% YoY primarily driven by a strong traction in cotton yarn
segment where exports went up from INR4.3mn in Q2FY11 to INR343.4mn in Q2FY12.
Adjusted for MTM loss of INR122.4mn, EBIDTA margin came in higher at 17.3% against
our expectation of 17%, essentially due to higher margins enjoyed by exports of cotton
yarn. Due to such higher margins and lower tax rate, the adjusted PAT came at
INR190mn against our expectation of INR175mn. KPR has completed 90% of its capex
for the new compact yarn and is expected to operate at full capacity utilization post
Dec 2011 (currently operating at 30%).
Sugar subsidiary to bring in self sufficiency in power
KPR has announced a strategic investment to foray into power and sugar by setting up
5000 TCD sugar plant along with a co‐generation capacity of 34MW. The company has
incorporated KPR Sugar Mills Ltd ‐ a wholly owned subsidiary of KPR Mills Ltd. The
total capex for the same is to the tune of INR3.25bn of which INR1.6bn will be utilized
for sugar plant and the remaining for power generation. This will help KPR attain 100%
self sufficiency in power needs. The management expects commercialization of the
plant in H2FY13 (Oct – Dec 2012). However, we have not factored in any revenues
from the sugar plant in our model.
Outlook and valuations: Worst behind us; maintain ‘HOLD’
With a sharp correction in cotton and yarn prices, we believe that the worst is over for
the company. However, we continue to remain cautious on the company’s new
venture into sugar and co‐generation segments. We value the company at 4x FY13E
EV/EBIDTA and arrive at a price of INR148 for the stock. We maintain our ‘HOLD’ rating
on the stock.
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