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Textiles
ƒ Cotton players likely to perform better than man-made segment
We expect our coverage universe to report a topline growth of 13.5%
YoY and 9.9% QoQ. Multiple factors like depreciating rupee (YoY),
seasonality impact and higher promotional offers are likely to aid this
growth. Cotton prices dipped 4.3% sequentially from an average of |
103.6/kg in December 2011 to | 99.2/kg as on March 2012. Cotton yarn
prices also rose by 15.6% QoQ to | 192/kg as compared to polyester
oriented yarn (POY), which grew by a mere 2.8% QoQ to | 112/kg.
In our coverage universe, we expect Alok Industries and Vardhman
Textiles to report healthy revenue growth on the back of higher yarn
prices. Innerwear companies like Page Industries, Lovable Lingerie and
Rupa & Company are expected to grow in excess of 20%.
ƒ Benefit of lower cotton prices; but dent of higher ad spends
With cotton prices correcting ~35% YoY, the companies are likely to
benefit from lower input costs. Accordingly, the operating margins of
Alok Industries, Bombay Rayon and Vardhman Textiles are likely to
witness operating margin expansion. However, players like Kewal Kiran
Clothing and Lovable Lingerie, have increased their advertising
expenses and the same is likely to weigh on the operating efficiency. On
the other hand, Page Industries and Rupa & Company are expected to
witness operating margin expansion due to higher share of premium
products.
ƒ One-off gains could be a positive surprise
On account of high volatility in rupee levels during the year, the
companies had to provide for MTM losses. However, with the rupee
appreciating as compared to Q3FY12, some companies are expected to
benefit significantly from the write-back of such provisions.
ƒ Man-made fibre players: Hit by lower demand, higher input prices
The ratio of cotton yarn price to POY has come down from a high of
2.1x in April 2011 to 1.7x in March 2012. While demand for cotton yarn
has been on the rise, polyester players continue to witness inventory
pile-up due to lower demand. On the other hand, prices of PTA and
MEG (key raw materials) have remained high while that of polyester
chips and POY are down by 5-6% YoY. This signals further pressure on
the operating margin, going forward.
Company specific view
Company Remarks
Alok
Industries
While the business scenario continues to remain normal, Alok is expected to write back |
150 crore of the total hit of | 350 crore taken due to depreciation of the rupee as the
rupee closed higher in Q4FY12 (as compared to Q3FY12). On the back of this, net profit is
likely to jump by 75% YoY to | 279.8 crore
Bombay
Rayon
Fashions
Topline is expected to grow 6% YoY to | 727.2 crore. While fabric segment revenues are
expected to grow 30.6% YoY (19% volume growth to 31.6 million metre & 10% realisation
growth to | 135/metre), we expect garment segment revenues to remain flat. Operating
margins are likely to improve YoY to 26.5% (in Q4FY11 margins were impacted by high
raw material prices)
JBF
Industries
JBF's Q4FY12E revenues are likely to de-grow 10.5% YoY due to flat volumes and lower
realisations. We expect the company to report a topline of | 1,734.1 crore. Due to
increase in prices of key raw materials (PTA and MEG), we expect pressure on the
operating margin to remain. Unlike a bumper FY11, we expect the company to report an
operating margin of 9.5% (14.4% in Q4FY11)
Kewal Kiran We expect KKCL to report 13.1% growth in sales to | 61.8 crore on the back of 10.9%
growth in the apparel segment. While realisations in the apparel segment are likely to be
flat YoY at | 722/piece, we expect volumes to grow 8% YoY to 8 lakh pieces. We expect
a 440 bps YoY drop in operating margin to 24.8% due to higher ad spends & also pressure
due to increased promotions during the quarter.
Lovable
Lingerie
We expect Lovable Lingerie to post a 24.9% YoY growth in sales to | 20.0 crore. The
operating margin is expected to dip by 210 bps YoY due to increased promotional
expenses. We expect the company to report an operating margin of 15.5%. A lower tax
outgo (due to the Roorkee plant) is likely to aid bottomline growth of 67.2% YoY to | 2.5
crore.
Page
Industries
Page Industries' Q4FY12E sales are expected to grow at 40.8% YoY to | 156.8 crore on
the back of price hikes taken by the company during the year and also due to higher
share of women's products in the overall mix. Consequently, the operating margin is also
likely to improve by 80 bps YoY to 16.2%
Rupa &
Company
Rupa is expected to report a YoY topline growth of 23.0% to | 233.0 crore on the back of
increasing share of premium and super-premium category products. Higher ad spends is
likely to eat into the operating profit. We expect the company to report an EBITDA margin
of 9.2% as against 9.9% in Q4FY11
Vardhman
Textiles
We expect a 36.4% growth in sales to | 1,222.5 crore, led by 10% and 12% growth in the
yarn and fabric segment, respectively. Operating margins are likely to improve by 140 bps
QoQ to 18.7% on a sequential basis due to softening of raw material prices
Source: Company, ICICIdirect.com Research
: Company Specific View (Q4FY12E)
Company Remarks
Cox & Kings Standalone revenue is expected to grow ~23% YoY. On a consolidated basis, we
expect revenue growth of 106% YoY due to HBR acquisition. On a consolidated basis,
the EBITDA margin is expected to take a hit due to operational loss from HBR on
account of the lean season
Everest Kanto Sales would be lower YoY led by a dip in realisations on the back of a slowdown in the
international business. Volume sales are expected to be ~2.3 lakh cylinders. Margins
would improve considerably QoQ by ~800 bps but remain lower YoY by ~340 bps at
18.8%
InfoEdge Revenues are expected to grow 22.5% YoY to | 99.1 crore from | 80.9 crore in
Q4FY11. However, margins are expected to remain under pressure led by higher
spends on marketing and promotional activities
Praj Industries The order book last quarter stood at ~| 900 crore. We expect ~| 200 crore orders to
have been fulfilled. We estimate new order inflows of ~| 260 crore during the quarter
with the order book now standing at | 950 crore. Increasing orders for consultancy
business and international operations is expected to improve margins by ~150 bps
YoY to 11.4%
Maharashtra
Seamless
For Q4FY12E, we expect sales volumes to be to ~101000 tonnes. Seamless pipes
volumes are expected to be ~66000 tonnes while that of ERW is expected to be
~35000 tonnes. We expect resultant PAT to be higher by 3.8% QoQ but lower by
7.2% YoY
Navneet
Publications
We expect topline to increase by 23.3% YoY (| 117.2 crore) led by strong growth in
the publications segment. The stationery segment is likely to witness a recovery in
sales to | 64.6 crore. We expect an EBITDA margin of 11.2% (lower by 70 bps QoQ)
due to the rupee impact on the stationery segment
Sintex Industries Monolithic sales are expected to decline ~4% YoY on account of a slowdown in order
execution while prefabs sales are expected to increase ~30% YoY. In custom
moulding, we expect sales to decline ~20% YoY in domestic business and ~40% YoY
in overseas business due to industrial slowdown in both markets
Talwalkar's
Better Value
Fitness
Revenue is expected to grow ~13% YoY due to a seasonally strong quarter and new
gym additions during Q4FY12. EBITDA is expected to improve by 21% YoY (EBITDA
margin up ~200 bps YoY) due to moderate growth in operating cost (~7% YoY). Net
profit is expected to grow 10% YoY during Q4FY12
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf
Textiles
ƒ Cotton players likely to perform better than man-made segment
We expect our coverage universe to report a topline growth of 13.5%
YoY and 9.9% QoQ. Multiple factors like depreciating rupee (YoY),
seasonality impact and higher promotional offers are likely to aid this
growth. Cotton prices dipped 4.3% sequentially from an average of |
103.6/kg in December 2011 to | 99.2/kg as on March 2012. Cotton yarn
prices also rose by 15.6% QoQ to | 192/kg as compared to polyester
oriented yarn (POY), which grew by a mere 2.8% QoQ to | 112/kg.
In our coverage universe, we expect Alok Industries and Vardhman
Textiles to report healthy revenue growth on the back of higher yarn
prices. Innerwear companies like Page Industries, Lovable Lingerie and
Rupa & Company are expected to grow in excess of 20%.
ƒ Benefit of lower cotton prices; but dent of higher ad spends
With cotton prices correcting ~35% YoY, the companies are likely to
benefit from lower input costs. Accordingly, the operating margins of
Alok Industries, Bombay Rayon and Vardhman Textiles are likely to
witness operating margin expansion. However, players like Kewal Kiran
Clothing and Lovable Lingerie, have increased their advertising
expenses and the same is likely to weigh on the operating efficiency. On
the other hand, Page Industries and Rupa & Company are expected to
witness operating margin expansion due to higher share of premium
products.
ƒ One-off gains could be a positive surprise
On account of high volatility in rupee levels during the year, the
companies had to provide for MTM losses. However, with the rupee
appreciating as compared to Q3FY12, some companies are expected to
benefit significantly from the write-back of such provisions.
ƒ Man-made fibre players: Hit by lower demand, higher input prices
The ratio of cotton yarn price to POY has come down from a high of
2.1x in April 2011 to 1.7x in March 2012. While demand for cotton yarn
has been on the rise, polyester players continue to witness inventory
pile-up due to lower demand. On the other hand, prices of PTA and
MEG (key raw materials) have remained high while that of polyester
chips and POY are down by 5-6% YoY. This signals further pressure on
the operating margin, going forward.
Company specific view
Company Remarks
Alok
Industries
While the business scenario continues to remain normal, Alok is expected to write back |
150 crore of the total hit of | 350 crore taken due to depreciation of the rupee as the
rupee closed higher in Q4FY12 (as compared to Q3FY12). On the back of this, net profit is
likely to jump by 75% YoY to | 279.8 crore
Bombay
Rayon
Fashions
Topline is expected to grow 6% YoY to | 727.2 crore. While fabric segment revenues are
expected to grow 30.6% YoY (19% volume growth to 31.6 million metre & 10% realisation
growth to | 135/metre), we expect garment segment revenues to remain flat. Operating
margins are likely to improve YoY to 26.5% (in Q4FY11 margins were impacted by high
raw material prices)
JBF
Industries
JBF's Q4FY12E revenues are likely to de-grow 10.5% YoY due to flat volumes and lower
realisations. We expect the company to report a topline of | 1,734.1 crore. Due to
increase in prices of key raw materials (PTA and MEG), we expect pressure on the
operating margin to remain. Unlike a bumper FY11, we expect the company to report an
operating margin of 9.5% (14.4% in Q4FY11)
Kewal Kiran We expect KKCL to report 13.1% growth in sales to | 61.8 crore on the back of 10.9%
growth in the apparel segment. While realisations in the apparel segment are likely to be
flat YoY at | 722/piece, we expect volumes to grow 8% YoY to 8 lakh pieces. We expect
a 440 bps YoY drop in operating margin to 24.8% due to higher ad spends & also pressure
due to increased promotions during the quarter.
Lovable
Lingerie
We expect Lovable Lingerie to post a 24.9% YoY growth in sales to | 20.0 crore. The
operating margin is expected to dip by 210 bps YoY due to increased promotional
expenses. We expect the company to report an operating margin of 15.5%. A lower tax
outgo (due to the Roorkee plant) is likely to aid bottomline growth of 67.2% YoY to | 2.5
crore.
Page
Industries
Page Industries' Q4FY12E sales are expected to grow at 40.8% YoY to | 156.8 crore on
the back of price hikes taken by the company during the year and also due to higher
share of women's products in the overall mix. Consequently, the operating margin is also
likely to improve by 80 bps YoY to 16.2%
Rupa &
Company
Rupa is expected to report a YoY topline growth of 23.0% to | 233.0 crore on the back of
increasing share of premium and super-premium category products. Higher ad spends is
likely to eat into the operating profit. We expect the company to report an EBITDA margin
of 9.2% as against 9.9% in Q4FY11
Vardhman
Textiles
We expect a 36.4% growth in sales to | 1,222.5 crore, led by 10% and 12% growth in the
yarn and fabric segment, respectively. Operating margins are likely to improve by 140 bps
QoQ to 18.7% on a sequential basis due to softening of raw material prices
Source: Company, ICICIdirect.com Research
: Company Specific View (Q4FY12E)
Company Remarks
Cox & Kings Standalone revenue is expected to grow ~23% YoY. On a consolidated basis, we
expect revenue growth of 106% YoY due to HBR acquisition. On a consolidated basis,
the EBITDA margin is expected to take a hit due to operational loss from HBR on
account of the lean season
Everest Kanto Sales would be lower YoY led by a dip in realisations on the back of a slowdown in the
international business. Volume sales are expected to be ~2.3 lakh cylinders. Margins
would improve considerably QoQ by ~800 bps but remain lower YoY by ~340 bps at
18.8%
InfoEdge Revenues are expected to grow 22.5% YoY to | 99.1 crore from | 80.9 crore in
Q4FY11. However, margins are expected to remain under pressure led by higher
spends on marketing and promotional activities
Praj Industries The order book last quarter stood at ~| 900 crore. We expect ~| 200 crore orders to
have been fulfilled. We estimate new order inflows of ~| 260 crore during the quarter
with the order book now standing at | 950 crore. Increasing orders for consultancy
business and international operations is expected to improve margins by ~150 bps
YoY to 11.4%
Maharashtra
Seamless
For Q4FY12E, we expect sales volumes to be to ~101000 tonnes. Seamless pipes
volumes are expected to be ~66000 tonnes while that of ERW is expected to be
~35000 tonnes. We expect resultant PAT to be higher by 3.8% QoQ but lower by
7.2% YoY
Navneet
Publications
We expect topline to increase by 23.3% YoY (| 117.2 crore) led by strong growth in
the publications segment. The stationery segment is likely to witness a recovery in
sales to | 64.6 crore. We expect an EBITDA margin of 11.2% (lower by 70 bps QoQ)
due to the rupee impact on the stationery segment
Sintex Industries Monolithic sales are expected to decline ~4% YoY on account of a slowdown in order
execution while prefabs sales are expected to increase ~30% YoY. In custom
moulding, we expect sales to decline ~20% YoY in domestic business and ~40% YoY
in overseas business due to industrial slowdown in both markets
Talwalkar's
Better Value
Fitness
Revenue is expected to grow ~13% YoY due to a seasonally strong quarter and new
gym additions during Q4FY12. EBITDA is expected to improve by 21% YoY (EBITDA
margin up ~200 bps YoY) due to moderate growth in operating cost (~7% YoY). Net
profit is expected to grow 10% YoY during Q4FY12
Source: Company, ICICIdirect.com Research
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