Expect Margin Expansion on Excise Benefits
and Premium Products
Maxwell Industries Q4FY13 sales & EBITDA grew 16% & 10% YoY to Rs.
581mn & Rs. 42mn while it reported net loss of Rs. 1.4mn as against net loss
of Rs. 8.6mn in the corresponding quarter. For full year FY13, sales &
EBITDA grew 14% & 11% while it reported net profit at Rs. 29mn vs loss of
Rs 12mn in FY12.
Revenue Growth: The Company’s top‐line grew 16.2% YoY to Rs. 581 mn
(our expectations Rs. 595 mn) during Q4FY13. During FY13, revenue grew
14.0% to Rs. 2,537 mn where realizations grew over 20% YoY. Maxwell has
introduced ~80 new styles in FY13 while some premium products are in final
stages of launch. It is focused on new products under Eminence & VIP
brands to establish itself as a premium innerwear manufacturer. This is
expected to further improve operating margins on higher realizations.
Operating margins: The Company’s EBITDA grew 7.4% YoY to Rs. 41.7 mn
(our expectations Rs. 53.5 mn) during Q4FY13 on account of higher advt.
expenses. EBITDA margin for the quarter stood at 7.2%; slipped 57bps YoY.
Adv. exp were up by 7x YoY to Rs. 44.0 mn for Q4FY13. EBITDA for FY13
grew 11.0% to Rs. 205mn where the Company spent Rs. 133.3mn in Adv. Exp
(Budgeted Rs. 100mn) compared to Rs. 37.7mn during FY12. Going forward,
better operating margins are expected on lower advt. exp and higher
realizations on excise duty removal.
Maxwell reported net loss of Rs. 1.4mn for Q4FY13 compared to loss of Rs.
8.6mn in the corresponding quarter. However for FY13, Maxwell reported
net income of Rs. 28.5mn against net loss of Rs. 12.3mn in FY12.
We revised down our expected Sales by 6.8% and 10.4% & EBITDA by 1.9%
& 14.5% for FY14E and FY15E respectively on slower volume growth. Net
Income revised down by 13.1% and 33.1% for FY14E and FY15E respectively.
Outlook & Valuations
We expect revenues & net income to grow at a CAGR of 16% and 111% over
FY13‐FY15E. At CMP of Rs. 14, the stock trades at 5.3x & 7.0x FY15E
EV/EBITDA and earnings. We reiterate our “BUY” recommendation and
downgrade our target price to Rs. 21 (Rs. 24) per share based on 6.5x FY15E
EV/EBITDA & 10.5x FY15 EPS, having potential upside of 49%.
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and Premium Products
Maxwell Industries Q4FY13 sales & EBITDA grew 16% & 10% YoY to Rs.
581mn & Rs. 42mn while it reported net loss of Rs. 1.4mn as against net loss
of Rs. 8.6mn in the corresponding quarter. For full year FY13, sales &
EBITDA grew 14% & 11% while it reported net profit at Rs. 29mn vs loss of
Rs 12mn in FY12.
Revenue Growth: The Company’s top‐line grew 16.2% YoY to Rs. 581 mn
(our expectations Rs. 595 mn) during Q4FY13. During FY13, revenue grew
14.0% to Rs. 2,537 mn where realizations grew over 20% YoY. Maxwell has
introduced ~80 new styles in FY13 while some premium products are in final
stages of launch. It is focused on new products under Eminence & VIP
brands to establish itself as a premium innerwear manufacturer. This is
expected to further improve operating margins on higher realizations.
Operating margins: The Company’s EBITDA grew 7.4% YoY to Rs. 41.7 mn
(our expectations Rs. 53.5 mn) during Q4FY13 on account of higher advt.
expenses. EBITDA margin for the quarter stood at 7.2%; slipped 57bps YoY.
Adv. exp were up by 7x YoY to Rs. 44.0 mn for Q4FY13. EBITDA for FY13
grew 11.0% to Rs. 205mn where the Company spent Rs. 133.3mn in Adv. Exp
(Budgeted Rs. 100mn) compared to Rs. 37.7mn during FY12. Going forward,
better operating margins are expected on lower advt. exp and higher
realizations on excise duty removal.
Maxwell reported net loss of Rs. 1.4mn for Q4FY13 compared to loss of Rs.
8.6mn in the corresponding quarter. However for FY13, Maxwell reported
net income of Rs. 28.5mn against net loss of Rs. 12.3mn in FY12.
We revised down our expected Sales by 6.8% and 10.4% & EBITDA by 1.9%
& 14.5% for FY14E and FY15E respectively on slower volume growth. Net
Income revised down by 13.1% and 33.1% for FY14E and FY15E respectively.
Outlook & Valuations
We expect revenues & net income to grow at a CAGR of 16% and 111% over
FY13‐FY15E. At CMP of Rs. 14, the stock trades at 5.3x & 7.0x FY15E
EV/EBITDA and earnings. We reiterate our “BUY” recommendation and
downgrade our target price to Rs. 21 (Rs. 24) per share based on 6.5x FY15E
EV/EBITDA & 10.5x FY15 EPS, having potential upside of 49%.
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