HIMATSINGKA SEIDE LTD ISIN · The Rs. 30000 mn Himatsingka Group is a vertically integrated textile...

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HIMATSINGKA SEIDE LTDResult Update (CONSOLIDATED BASIS): Q3 FY18

CMP: 397.00 APR 17th, 2018

Overweight ISIN:INE049A01027

Index Details SYNOPSIS The Rs. 30000 mn Himatsingka Group is a

vertically integrated textile major with a globalfootprint.

Consolidated revenue for the 3rd quarter registeredat Rs. 5956.10 mn as compared to Rs. 5476.40 mn,up by 8.76% in the corresponding period of theprevious year.

During Q3 FY18, consolidated EBIDTA was Rs.1097.30 mn as against Rs. 1042.10 mn in thecorresponding period of the previous year.

Consolidated PBT of the company for Q3 FY18registered at Rs. 711.00 mn as against Rs. 603.30mn in Q3 FY 17.

Consolidated net profit increased by 11.20% to Rs.501.30 mn in the current quarter as against Rs.450.80 mn in the corresponding period of theprevious year.

EPS of the company registered at Rs. 5.09 as againstRs. 4.58 in the corresponding previous year.

Consolidated Total Income for 9M FY18 stood atRs. 17092.40 mn as against Rs. 15541.40 mn in 9MFY17, an increase of 9.98%.

Consolidated PAT for 9M FY18 up by 10.84% toRs. 1513.20 mn as against Rs. 1365.20 mn in 9MFY17.

Revenues from Brands reached approximately Rs.11000 mn for 9 Months ended December 31, 2017compared to Rs.12000 mn FY17.

Net Sales and PAT of the company is expected togrow at a CAGR of 12% and 23% over 2016 to2019E, respectively.

Stock DataSector TextilesBSE Code 514043Face Value 5.0052wk. High / Low (Rs.) 444.35/290.50Volume (2wk. Avg.) 8392Market Cap (Rs. in mn.) 39088.62

Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs in mn) FY17A FY18E FY19ENet Sales 21384.10 23465.43 26281.28EBITDA 3908.90 4497.03 4923.45Net Profit 1821.00 2041.25 2323.67EPS 18.49 20.73 23.60P/E 21.47 19.15 16.82

Shareholding Pattern (%)

As on Dec 2017 As on Sep 2017

Promoter 47.57 57.22

Public 52.43 42.78

Others -- --

1 Year Comparative Graph

HIMATSINGKA SEIDE LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E(X)(TTM) P/BV(X) DIVIDENDCompany Name (Rs.) Rs. In mn. (Rs.) Ratio Ratio (%)Himatsingka Seide Ltd 397.00 39088.62 20.00 19.85 3.66 50.00Welspun India Ltd 53.55 53803.00 4.61 11.62 2.21 65.00Sangam (India) Ltd 122.25 4819.30 6.33 19.31 0.98 20.00Nitin Spinners Ltd 99.00 5466.80 9.69 10.22 2.06 12.00


QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)

Results updates- Q3 FY18,

(Rs in millions) Dec-17 Dec-16 % Change

Revenue 5956.10 5476.40 8.76%

Net Profit 501.30 450.80 11.20%

EPS 5.09 4.58 11.20%

PBIDT 1097.30 1042.10 5.30%

The consolidated net profit increased by 11.20% to Rs. 501.30 million in the current quarter from Rs. 450.80 million in

the corresponding period of the previous year. Revenue for the quarter stood at Rs. 5956.10 million as against Rs. 5476.40

million, when compared with the prior year period, up by 8.76%. Reported earnings per share of the company stood at Rs.

5.09 per share during the quarter from Rs. 4.58 a share during the corresponding previous year quarter. Profit before

interest, depreciation and tax is Rs. 1097.30 million as against Rs. 1042.10 million in the corresponding period of the

previous year.

Break up of Expenditure

Break up ofExpenditure

Value in Rs. Million

Q3 FY18 Q3 FY17 %Change

Cost of MaterialConsumed 1913.30 2737.30 -30%

Purchase of Stock inTrade 1347.40 1243.80 8%

Employee BenefitExpenses 544.60 593.70 -8%

Depreciation &AmortizationExpenses

168.10 165.20 2%

Other Expenses 1185.40 753.90 57%


Performance Highlights:

Consolidated Total Income for 9M FY18 stood at Rs. 17092.40 mn as against Rs. 15541.40 mn in 9M FY17, an

increase of 9.98%.

Consolidated EBITDA for 9M FY18 increased by 15.7% to Rs. 3350.8 mn as compared to Rs. 2895.7 mn in 9M

FY17. In nine months of FY18, EBITDA Margin stood at 19.8% compared to 18.4% in the corresponding period of

FY17.

Consolidated PBT for 9m FY18 up by 19.9% to Rs. 2116.6 mn as compared to Rs. 1765.3 mn in 9M FY17.

Consolidated PAT for 9M FY18 up by 10.84% to Rs. 1513.20 mn as against Rs. 1365.20 mn in 9M FY17.

DISTRIBUTION BUSINESS – DRIVEN BY BRANDS:

Revenues from Brands reached approximately Rs. 11000 mn for 9 Months ended December 31, 2017 compared toRs.12000 mn FY17.

Over 10 brands in protfolio, however, going forward focusing on larger brands in the portfolio

Brands will enhence quality of revenue streams, sustainability and increase relative pricing power

Pimacott only credibale cotton track and trace technology globally. Successfully launched in FY17.

COMPANY PROFILE

The Rs. 30000 mn Himatsingka Group is a vertically integrated textile major with a global footprint. The Group focuses

on the manufacture, retail and distribution of Home Textile Products. On the manufacturing front, the Group operates

amongst the largest capacities in the world for bed linen products, upholstery & drapery fabrics and Ultra-Fine cotton

yarn. Spread across Asia, Europe and North America, its retail and wholesale distribution divisions carry some of the most

prestigious brands in the Home Rextile space abd cater to Private Label Programs of major retailers across these

geographies. With over 6000 people, the Group continues to expand its reach and build capacities in the Tetile space.


FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2016 -2019E

FY16A FY17A FY18E FY19EASSETS1) Non-Current Assets

a) Property, plant and equipment 6222.00 8215.70 9448.06 10676.30b) Capital Work in Progress 388.80 1129.40 1242.34 1341.73c) Investment Property 394.60 364.50 353.57 346.49d) Goodwill 3525.50 3414.20 3243.49 3146.19e) Other Intangible Assets 481.50 674.70 573.50 527.62f) Financial Assets

i) Investments 1.90 1.90 2.00 2.07ii) Loans 9.10 10.00 10.80 11.45iii) Others 99.10 162.70 208.26 262.40

g) Deferred Tax Assets (net) 712.60 340.10 425.13 514.40h) Non-Current tax Assets 88.90 134.40 168.00 201.60i) Other Non Current Assets (net) 1122.80 2010.80 2312.42 2613.03Sub - Total Non- Current Assets 13046.80 16458.40 17987.54 19643.28

2) Current Assetsa) Inventories 5842.40 7538.80 8292.68 8956.09b) Financial assets

i) Trade Receivables 608.20 682.80 751.08 811.17ii) Cash and Cash equivalents 1220.70 2036.00 2300.68 2530.75iii) Loans 24.30 20.00 17.00 15.30iv) Others 167.20 481.90 602.38 740.92

c) Other Current Assets 1066.80 1278.50 1470.28 1661.41d) Non-Current Assets Classified as held for sale 13.10 344.40 430.50 516.60Sub - Total Current Assets 8942.70 12382.40 13864.59 15232.24

Total Assets (1+2) 21989.50 28840.80 31852.13 34875.53EQUITY AND LIABILITIES1) EQUITY

a) Equity Share Capital 492.30 492.30 492.30 492.30b) Other Equity 8405.00 10180.30 12221.55 14545.22

Total Equity 8897.30 10672.60 12713.85 15037.522) Non Current Liabilities

a) Financial Liabilitiesi) Borrowings 5289.70 7397.80 6510.06 5989.26

b) Provisions 108.80 145.10 181.38 214.02c) Deferred Tax Liabilities 25.50 9.50 7.13 5.70d) Non-Current Tax Liabilities 39.90 0.00 0.00 0.00e) Other Non-Current Liabilities (net) 156.40 533.50 682.88 819.46Sub - Total Non Current Liabilities 5620.30 8085.90 7381.44 7028.44

3) Current Liabilitiesa) Financial liabilities

i) Borrowings 4450.10 6088.00 6726.46 7062.78ii) Trade Payables 1961.30 2685.00 3367.39 3682.75iii) Other financial liabilities 403.20 731.00 935.68 1169.60

b) Provisions 14.00 17.00 20.40 22.44c) Current tax Liabilities 330.80 101.70 86.45 77.80d) Other Current Liabilities 312.50 459.60 620.46 794.19Sub - Total Current Liabilities 7471.90 10082.30 11756.84 12809.56

Total Equity and Liabilities (1+2+3) 21989.50 28840.80 31852.13 34875.52


Annual Profit & Loss Statement for the period of 2016 to 2019E

Value(Rs.in.mn) FY16A FY17A FY18E FY19E

Description 12m 12m 12m 12mNet Sales 18913.10 21384.10 23465.43 26281.28Other Income 186.60 131.90 38.19 35.13Total Income 19099.70 21516.00 23503.61 26316.41Expenditure -15959.30 -17607.10 -19006.58 -21392.96Operating Profit 3140.40 3908.90 4497.03 4923.45Interest -934.10 -935.30 -948.71 -977.17Gross profit 2206.30 2973.60 3548.32 3946.28Depreciation -665.20 -580.10 -692.89 -796.82Profit Before Tax 1541.10 2393.50 2855.44 3149.46Tax -288.50 -572.50 -814.19 -825.79Net Profit 1252.60 1821.00 2041.25 2323.67Equity capital 492.30 492.30 492.30 492.30Reserves 8405.00 10180.30 12221.55 14545.22Face value 5.00 5.00 5.00 5.00EPS 12.72 18.49 20.73 23.60

Quarterly Profit & Loss Statement for the period of 30th June, 2017 to 31st Mar, 2018E

Value(Rs.in.mn) 30-June-17 30-Sep-17 31-Dec-17 31-Mar-18E

Description 3m 3m 3m 3mNet sales 5351.30 5785.00 5956.10 6373.03

Other income 36.40 137.70 -69.70 -66.22

Total Income 5387.70 5922.70 5886.40 6306.81

Expenditure -4266.20 -4790.40 -4789.10 -5160.88

Operating profit 1121.50 1132.30 1097.30 1145.93

Interest -252.20 -249.20 -218.20 -229.11

Gross profit 869.30 883.10 879.10 916.82

Depreciation -170.00 -176.60 -168.10 -178.19

Profit Before Tax 699.30 706.50 711.00 738.64

Tax -193.00 -200.90 -209.70 -210.59

Net Profit 506.30 505.60 501.30 528.05

Equity capital 492.30 492.30 492.30 492.30

Face value 5.00 5.00 5.00 5.00

EPS 5.14 5.14 5.09 5.36


Ratio Analysis

Particulars FY16A FY17A FY18E FY19E

EPS (Rs.) 12.72 18.49 20.73 23.60EBITDA Margin (%) 16.60% 18.28% 19.16% 18.73%PBT Margin (%) 8.15% 11.19% 12.17% 11.98%PAT Margin (%) 6.62% 8.52% 8.70% 8.84%P/E Ratio (x) 31.21 21.47 19.15 16.82ROE (%) 14.08% 17.06% 16.06% 15.45%ROCE (%) 13.28% 13.78% 14.66% 14.69%Debt Equity Ratio 1.09 1.26 1.04 0.87EV/EBITDA (x) 15.16 12.93 11.12 10.08Book Value (Rs.) 90.36 108.40 129.13 152.73P/BV 4.39 3.66 3.07 2.60

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 397.00, the stock P/E ratio is at 19.15 x FY18E and 16.82 x FY19E respectively.

Earning per share (EPS) of the company for the earnings for FY17E and FY18E is seen at Rs. 20.73 and Rs. 23.60,

respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 23% over 2016 to 2019E,

respectively.

On the basis of EV/EBITDA, the stock trades at 11.12 x for FY18E and 10.08 x for FY19E.

Price to Book Value of the stock is expected to be at 3.07 x and 2.60 x for FY18E and FY19E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

INDIAN ECONOMIC OVERVIEW:

India’s economy grew by 7.1% in FY 2017, which maintained India as the fastest growing economy in the world. The

growth momentum is expected to continue and is forecasted to increase to 7.2% in FY 2018 and gradually accelerate to

7.7% by the end of FY 2020, as per World Bank.

In FY 2017, the Indian economic growth was supported by strong fiscal consolidation, low current account deficit, and

growing Foreign Direct Investments (FDI). In addition, favorable monsoon boosted agriculture and rural consumption,

while urban consumption remained robust and exports rebounded in the third quarter of FY 2017. However, due to the

government’s demonetization initiative, growth momentum was adversely impacted during the second half of the year.

According to the World Bank, the buoyancy in the Indian economy is expected to continue because of gradual recovery in

private investment and strong domestic demand.


The political stability at the center further strengthens the Government’s pro-growth initiatives. The government of India

has been consistently working on inclusive development with the help of various reform announcements targeting to

improve the long term fundamentals of the country.

This is in order to set structural drivers for long term sustainable economic growth.

Industry Overview – Opportunities for Growth:

Global Textile & Apparel Trade Is Estimated To Grow At 4.5% – 5.0%, Likely To Touch USD 1 Trillion By 2021.

Among all, following are the key reforms and announcements by Government of India:

Demonetization:

It is expected to strengthen India’s institutional framework by reducing tax avoidance and corruption. It should also result

in efficiency gains through greater formalization of economic and financial activity, which would help broaden the tax

base and expand usage of the financial system. All this would be credit positive for the country.

Goods and Service Tax (GST):

GST came into force on 1st July, 2017, and it aims to aid economic activities in the country by simplifying the taxation

regime and bringing the effective tax lower for corporate. Inflation in 2016-17 was characterized by two distinctive

features. The Consumer Price Index (CPI) inflation, which averaged 4.5% during April - March 2016, eased since July

2016 on account of higher agricultural production due to good monsoons

Indian Textile Scenario:

Textile plays a major role in the Indian economy. It contributes 14% per cent to industrial production and 4% to GDP. It

employs over 45 million people, making it one of the largest sources of employment generation in the country. The

industry accounts for nearly 15% of total exports. The size of India’s textile market in 2016 was approximately USD 137

billion and it is expected to touch USD 226 billion by 2023, growing at a CAGR of 7.4% between 2016-23.

Over the years, India has gradually increased its share in the global textile exports from 3.6% in 2005 to 5.7% in 2016.

The strong performance of textile exports is reflected in the value of exports from the sector over the years. Textile

exports witnessed a growth (CAGR) of 6.9% over the period of FY 2006 - FY 2017. India has been able to achieve this

due to its competitive advantage and capacity built over years. The sector has also witnessed increasing outsourcing as

Indian players moved up the value chain from being mere converters to vendor partners of global retail giants.

Future Outlook:

The global home textile market was estimated at approximately USD 96 billion in 2016, and it is expected to reach USD

131.5 billion by 2020, growing at CAGR of 3.5%. The United States continue to dominate the market.

The Cotton Scenario:

Cotton is amongst the most extensively used fibers in the global textile space. India’s vast cotton resources give it a strong

competitive edge to compete for a larger share in global textile and apparel trade, as well as position it to address the


growing domestic demand for cotton textiles. After declining for four years, world cotton production increased in 2016-17

to 23.1 million metric tons. The world cotton production is expected to further increase in 2017-18 and reach 25.0 million

metric tons.

India and China contribute to approximately 50% of global cotton output. Over the years, India’s production has been

rising, while China’s production has been declining. As a result, India has taken over China as the world’s largest cotton

producer. In 2016-17, India contributed 25.1% of the global cotton production, while China contributed 21.6%. Cotton

production in the US has also been increasing gradually over the years and now contributes to approximately 16.0% of the

world’s cotton production. Table 12 below shows India’s cotton production vis-à-vis China, USA and Pakistan over the

last five years and also projection for 2017-18.

In 2016- 17, cotton production increased by 9.5% while the demand increased by 2.1%. The increase in production

primarily came from the US who contributed 45% of the 2.0 million metric tons increase in global production in 2016-17

over 2015-16.

Although the global demand continued to outpace the production, the gap narrowed between the demand and supply in

2016-17. It is also expected to further narrow in 2017-18.


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The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer orsolicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an officialconfirmation of any transaction. The information contained herein is from publicly available secondary sources and dataor other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should notbe relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damagethat may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.

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The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best oftheir knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Theanalyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Name of the Analyst Qualifications SectorsCovered

Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

No Interest/ Exposure

U. Janaki Rao M.B.A CapitalGoods


B. Anil Kumar M.B.A Auto, IT &FMCG


M. Vijay M.B.A Diversified No Interest/ ExposureV. Harini Priya M.B.A Diversified No Interest/ ExposureMD. Naveed M.B.A Diversified No Interest/ ExposureA. Bhikshapathi M.B.A Diversified No Interest/ Exposure

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HIMATSINGKA SEIDE LTD ISIN · The Rs. 30000 mn Himatsingka Group is a vertically integrated textile...

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