Kewal Kiran Clothing Ltd - Slow Revenue Growth; Well-Thought of Strategy to Create Demand Pull Brand; Result Update Q3FY15 ::Edelweiss, report

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Revenue growth revival holds key… • Kewal Kiran Clothing’s (KKCL) Q3FY15 results :: ICICI Securities

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Kewal Kiran Clothing Ltd - Margins disappoint; Third Quarter to hold the key; Result Update Q2FY15 :: Edelweiss, PDF link

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Margin continues to disappoint… • Kewal Kiran Clothing :: ICICI Securities, PDF link

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Kewal Kiran Clothing:: Margins at Comfort, Maintain “BUY” :: Karvy

Margins at Comfort, Maintain “BUY”
Kewal Kiran Clothing’s (KKCL) sales, EBITDA and net income declined by
9%, 3% and 4% YoY respectively on delayed festive season
The Company’s top‐line declined 9% YoY to Rs. 916.9 mn during Q2FY13,
while sequential growth was 61.3%. This slippage is due to delayed festive
season YoY, which adversely impacted volume by 11.7%. We expect strong
festive season in H2FY13 to cover up the revenue slippage. EBITDA margin
for the quarter expanded by 164 bps YoY at 27.7% however EBITDA declined
by 3.3% YoY to Rs. 254.4 mn during Q2FY13, due to revenue de‐growth. The
Company’s realization per garment went up by 6.3% to Rs. 791 for Q2FY13.
Net income of the Company declined 3.9% YoY to Rs. 176.5 mn while
sequential growth was much higher at 143%. Net Income Margin improved
by 103 bps YoY to 19.2%.

Kewal Kiran Clothing :: Karvy research

Strong Financials and Brand Portfolio
Kewal Kiran Clothing (KKCL) has a diversified brand portfolio across the
value pyramid. It’s brands like Killer, Integriti, LawmanPg3 and Easios caters
from premium apparel to mass brands where preference is shifting towards
branded apparel. Killer, the Company’s flagship brand is aimed at the
premium segment and has witnessed good growth due its positioning as an
attractive brand for the youth, while other three are strategically targeted at
semi‐premium to value‐for‐money branded segment ensuring minimal
cannibalisation across brands.

Hold Kewal Kiran Clothing Ltd; Target :Rs 588 ::ICICI Securities

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D e n t e d   b y   e a r l y   f e s t i v e  s e a s o n   &   h i g h e r   c o s t s …
Kewal Kiran Clothing’s (KKCL) Q3FY12 numbers were disappointing on all
aspects. Revenues remained flat YoY and operating margins came under
pressure due to higher costs and increased dependence on outsourcing.
In Q3FY12, revenues remained flat YoY at | 64.2 crore (| 63.0 crore –
Q3FY11) as against our estimate of | 81.6 crore. While garment
realisations improved by 10.6% to  | 801 per piece (I-direct estimate:
| 796), volumes dipped 9.3% to 7.7 lakh pieces lower than our estimate of
9.4 lakh pieces. Topline growth was  also impacted due to an earlier
festive season (as KKCL recognises sales when goods are sold to
distributors; that would be about a month prior to the actual festival time).
The operating margin at 18.6% was significantly lower than our estimates
(25.3%) as the impact of the excise duty was not fully passed on to
consumers. Also, the company incurred incremental selling expenses to
promote the accessories brands. Consequently, the bottomline was
dented and witnessed de-growth of 22.4% YoY to | 8.8 crore.
ƒ Expanding retail presence
During the quarter, the company added 26 new retail stores;
10 K-Lounges, seven Killer exclusive brand outlets, seven Integriti
stores and two Lawman Pg3 outlets. With this, the company has a
presence in over 110 cities and 19 states across India.
V a l u a t i o n
The company has reported a flat topline growth and bottomline degrowth for the first time in the last 10–12 quarters. This tepid performance
can be attributed to a number of reasons like early festive season,
dampened consumer sentiment due to higher interest costs and inflation
and also rising promotional expenses for the company. Consequently, we
have downgraded our FY12E and  FY13E EPS by 12.4% and 11.1%,
respectively. While the virtually debt free status and strong cash (| 87 per
share)  work  in  favour  of  the  company,  we  remain  cautious  about  the
pressure on the operating margin and the dampened profitability. We
have valued KKCL at 12.0x FY13E EPS to  arrive  at  a  target  price  of  |  588.
The stock is currently trading at 15.7x and 12.9x FY12E and FY13E revised
EPS of | 40.3 and | 49.0, respectively. We maintain our HOLD rating on
the stock

KEWAL KIRAN CLOTHING Riding the ‘brand’wagon:: Edelweiss

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We recently interacted with management of Kewal Kiran Clothing (KKCL),
one of the leading manufacturers and retailers of branded apparels in
India. The company has under its belt a portfolio of well‐established
fashion brands like Killer, Lawman Pg3, Integriti and Easies, along with a
well oiled nationwide distribution network. Over the past two years the
company has moved from in‐house manufacturing to outsourcing model,
demonstrated sustainable growth history. KKCL has a strong balance
sheet (cash surplus), steady return ratios (25% ROAE and 33.6% ROCE in
FY11) besides robust free cash flows.
Strong brands across spectrum with robust distribution network
KKCL is a strong player in the branded readymade garments market with brands such as
Killer, Lawman Pg3, Integriti and Easies under its belt. Given the strong brand equity
and pricing power, KKCL has demonstrated sustainable growth trajectory across
economic cycles and against competitive pressures. The company markets its products
through a chain of 223 K‐Lounge showrooms and exclusive brand outlets (EBOs) across
the country. Besides, its products are widely marketed at over 3,500 multi‐brand
outlets (MBOs) and national chain stores like Shoppers Stop and Hypercity.
Asset‐light business model enables brand building focus
The company has altered its business strategy in favour of an asset‐light model by
focusing more on opening franchisee owned/leased stores as against company
owned/leased stores. Now the franchisee bears all capital investments as well as
operational, rental and overhead costs for stores. The in‐house to outsourcing
manufacturing ratio has improved from 85:15 in FY09 to 53:47 in FY11, enabling the
company reduce capital expenditure and labour costs, and concentrate on its core
areas of designing and brand building.
Outlook: Positive
With strong brands and distribution network, we believe KKCL is poised for growth over
the next few years. We do not have a recommendation on the stock as it is not under
our coverage.

Sell Kewal Kiran Clothing; Target : Rs 531:: ICICI Securities

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V a  l u a t i o n s   l o o  k   s t r e t c  h e d  …
Kewal Kiran Clothing’s (KKCL) Q1FY12 topline exceeded our expectations
but the bottomline was in line with expectations on the back of lower than
expected EBITDA margin. In Q1FY12, KKCL reported a topline growth of
52.7% to | 69.3 crore (I-direct estimate: | 56.0 crore) led by 34.4% growth
in the apparel business and strong growth in lifestyle accessories as well.
While apparel volumes increased by 16.9% YoY to 8.24 lakh units,
realisation increased by 17.5% YoY to | 760/piece. Also, sales of lifestyle
accessories in Q1FY12 exceeded the  sales for the entire year during
FY11, albeit on a small base. The EBITDA margin slipped from 28.1% in
Q1FY11 to 24.5% in Q1FY12 not only  due to the impact of higher raw
material cost (which was partially passed on to consumers) but also due
to increased promotional spending (IPL sponsorship). However, due to
strong topline growth and increased other income, PAT increased 42.5%
YoY to | 12.6 crore (I-direct estimate: | 10.1 crore).
ƒ Healthy growth across brands…
In Q1FY12, Lawman and Easies  grew 68% and 62% (on a smaller
base) to | 13.5 crore and | 1.6 crore, respectively while Killer,
Integriti grew 26%, 40% to | 32.1 crore, | 15.8 crore, respectively.
ƒ …and expanding retail presence aided topline growth
During Q1FY12, KKCL added 27 stores and closed three stores. The
addition comprised six K-Lounge, twelve Killer, one Lawman, seven
Integriti and one Addiction stores. KKCL’s store count increased
from 174 stores in Q4FY11 to 201 stores in Q1FY12.
V a l u a t i o n
KKCL has been delivering topline growth in excess of 20% and
bottomline growth of over 30% since Q4FY10. KKCL’s virtually debt-free
status and cash & cash equivalent  worth | 75/share also strengthen its
financial case. However, we continue  to believe these merits have been
factored into the share price and the stock is trading at peak valuations of
16.0x and 13.8x FY12E and FY13E EPS, respectively. On the back of
stretched valuations, we have a  SELL  rating on KKCL. We recommend
that investors holding this stock book profits at current levels.

Kewal Kiran Clothing : Growth priced in: ICICI Sec

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Kewal Kiran Clothing : Growth priced in…
Kewal Kiran Clothing’s (KKCL) Q3FY11 results were in line with our
estimates. KKCL’s topline increased 62.8% YoY to | 63.3 crore ahead of
our estimate of  | 57.5 crore, led by 46% volume growth and an 11%
increase in realisation to | 724 per unit. While the EBITDA margin was
lower than our expectation, it increased 351 bps YoY to 27.1%. A robust
topline growth and healthy margins  led to a PAT growth of 77.2% in
Q3FY11. PAT stood at | 11.3 crore ahead of our estimated | 10.5 crore.
We continue to opine that the valuations have captured the growth
potential of the company and investors should BOOK PROFITS at
current levels.