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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.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
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.
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