May 12, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Margins slide on higher input costs…
Arvind’s Q4FY17 consolidated revenues were marginally above our
estimates. However, profitability slightly missed our estimates
Revenues for the quarter grew 10.4% YoY to | 2464.8 crore (I-direct
estimate: | 2409.3 crore). Growth was fuelled by 22% YoY growth in
its brand & retail segment, which came in at | 829.2 crore. Standalone
textile business added to consolidated growth with revenues of
| 1459.5 crore (up 7.7% YoY)
‘Power’ brands (excluding Tommy Hilfiger) grew 21% YoY to | 515
crore (5.4% LTL). “Unlimited”, post completion of restructuring,
continued its growth trajectory in the current quarter reporting growth
of 29% YoY
Garments accelerated standalone growth with 28% YoY rise in
revenues to | 324 crore. In addition to the same, wovens posted
growth of 6.4% to | 535 crore while denim revenues were flattish at
| 462 crore. Sales volume for denim fabric was down 4.4% YoY to 24
million metre whereas volumes for woven were up 6.5% YoY to 31
million metre
Increase in cotton prices (up 17% YoY) coupled with higher share of
traded goods, adversely impacted consolidated EBITDA margins,
which fell 260 bps YoY to 9.1% vs. estimated 11.4%. Subsequently,
absolute EBITDA de-grew 14% YoY to | 223.5 crore vs. estimate
| 273.5 crore
Moderation of debt (down 19% YoY) resulted in a decline in interest
costs (down 35% YoY). In addition to the same, higher other income
(up 49% YoY) and lower tax rate (12% vs. 21% in Q4FY16) to an
extent moderated the PAT decline, which was at | 96.9 crore (I-direct
estimate: | 98.5 crore)
B&R segment margins improve led by ‘Power’ brands
The momentum in the B&R segment continued in Q4FY17 as it reported
robust revenue growth of 21.7% YoY to | 829.2 crore. Strong growth in
‘Power’ brands, coupled with improving profitability in ‘Unlimited’ and
speciality retail stores led to a strong expansion in EBITDA margins of
B&R segment by 350 bps YoY to 7.1%. Going forward, we expect the
momentum in B&R segment to continue resulting in revenue CAGR of
20% in FY16-19E.
Increase in cotton prices impacts profitability of standalone business…
Higher cotton prices impacted the profitability of the textile segment as
operating margins declined 260 bps YoY to 12.7%. Also, average
realisation (per metre) for denim and woven fabrics remained flattish YoY
to | 181 and | 167, respectively. At a consolidated level, we expect
operating margins to stay under pressure due to higher share of B&R
segment in revenue mix (low margin business) and high cotton prices.
Robust growth in B&R segment expected to continue; maintain BUY…
Brands of ALBL are uniquely positioned as the apt mix across the apparel
value/gender chain. In addition, strong EBITDA growth for the B&R
segment in Q4FY17 indicates operating leverage playing in favour of the
company. Enhanced focus would continue to be on speciality retail
segment, which comprises brands like GAP, Sephora & Aeropostale, The
Children’s place (TCP). We believe that as revenues from these brands
scale up, RoCEs would drastically improve. With visibility on profitable
earnings, Arvind continues to stay our preferred pick in the textile sector.
Arvind Ltd (ARVMIL) | 396
Rating matrix
Rating : Buy
Target : | 480
Target Period : 12 months
Potential Upside : 21%
What’s changed?
Target Unchanged
EPS FY18E Changed from | 21.8 to | 17.5
EPS FY19E Changed from | 27.9 to | 23.9
Rating Unchanged
Quarterly performance
| Crore Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)
Revenue 2,464.8 2,232.8 10.4 2,335.5 5.5
EBITDA 223.5 260.4 (14.2) 237.0 (5.7)
EBITDA (%) 9.1 11.7 -259 bps 10.1 -108 bps
PAT 96.9 97.8 (0.9) 75.5 28.4
Key financials
| Crore FY16 FY17E FY18E FY19E
Net Sales 8,011 9,236 10,516 11,842
EBITDA 951 943 1,123 1,356
Net Profit 316.1 320.1 451.4 617.9
EPS (|) 12.3 12.4 17.5 23.9
Valuation summary
FY16 FY17E FY18E FY19E
P/E (x) 32.3 31.9 22.6 16.5
Target P/E (x) 36.6 36.2 25.6 18.7
EV/EBITDA (x) 14.4 13.8 11.5 9.4
P / BV (x) 2.7 2.0 1.0 0.8
RONW (%) 11.9 9.0 12.6 15.0
ROCE (%) 11.6 10.1 12.9 15.1
Stock data
Particular Amount
Market Capitalization (| Crore) 10,231.1
Total Debt (FY17) (| Crore) 231.9
Cash (FY17) (| Crore) 199.8
EV (| Crore) 10,263.1
52 week H/L 426 / 286
Equity Capital (| Crore) 258.4
Face Value (|) 10.0
Peer Comparison
1M 3M 6M 12M
Kewal Kir.Cloth. 3.09 (0.37) (6.67) (2.58)
Arvind Ltd 5.68 9.47 8.26 45.97
Raymond 18.92 52.00 31.52 62.23
K P R Mill Ltd 9.26 29.76 31.09 72.22
Research Analyst
Bharat Chhoda
Ankit Panchmatia
Cheragh Sidhwa
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
| crore Q4FY17 Q4FY17E Q4FY16 YoY (%) Q3FY17 QoQ (%) Comments
Revenue 2,464.8 2,409.3 2,232.8 10.4 2,335.5 5.5 Growth remained supportive of brand & retail (+22% YoY) and textile
business (+8% YoY)
RM Cost 1,195.6 1,055.9 994.1 20.3 1,034.4 15.6 Increase in cotton prices resulted in higher RM expenses
Power & Fuel 130.0 124.7 118.0 10.2 120.8 7.6
Employee Benefit Expenses 258.9 292.1 238.6 8.5 288.0 -10.1
Other Expenditure 656.8 663.1 621.8 5.6 655.3 0.2
Total Expense 2,241.3 2,135.8 1,972.5 13.6 2,098.4 6.8
EBITDA 223.5 273.5 260.4 -14.2 237.0 -5.7
EBITDA Margin (%) 9.1 11.4 11.7 -259 bps 10.1 -108 bps
Depreciation 82.7 73.4 62.9 31.4 73.4 12.8
Interest 58.5 75.6 90.0 -35.0 67.6 -13.5 Decline in debt resulted in reduction interest expenses
Other Income 28.4 11.1 19.0 49.0 10.9 160.0
PBT 110.6 135.7 126.5 -12.5 107.0 3.5
Total Tax 13.1 40.7 26.7 -51.0 28.1 -53.5
Reported PAT (Incld Minority Int) 96.9 98.5 97.8 -0.9 75.5 28.4 Higher other income and lower tax rate moderated the decline in PAT
Key Metrics Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%)
Textiles 1,459.5 1,354.7 7.7 1,402.2 4.1 Growth was mainly due to 28% growth in the garments business and
6.4% growth in wovens
Brand & Retail 829.2 681.1 21.7 764.5 8.5 With new Ind-As, Tommy Hilfiger revenues would now not form a part of
brands & retail. Adjusting for the same, power brands grew 21% YoY.
However, overall brand & retail grew 22%
Real Estate & Others 0.0 0.0 NA 0.0 NA Due to de-merger of real estate business
Arvind Internet 5.8 2.0 188.9 4.7 22.1 With the launch of NNNow, the internet business is gaining traction
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore) Old New % Change Old New % Change Comments
Revenue 10,513.0 10,516.2 0.0 11,837.1 11,841.7 0.0 Continue to maintain revenue growth estimates
EBITDA 1,353.1 1,122.9 -17.0 1,582.5 1,356.4 -14.3
EBITDA Margin (%) 12.9 10.7 -219 bps 13.4 11.5 -191 bps Revise our esimates downwards
PAT 561.2 451.4 -19.6 719.1 617.9 -14.1
EPS (|) 21.8 17.5 -19.7 27.9 23.9 -14.2 Revise our esimates downwards
FY18E FY19E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis
Arvind - One stop shop for apparel requirements
Arvind possesses key ingredients that would enable it to capture the high
trajectory growth opportunity in the apparel segment. Having diversity in
offerings across menswear, womenswear and kidswear; positions the
company as a one-stop to shop for all apparel requirements of a family.
The company is equipped with probably the best portfolio of brands (both
owned and licensed) in the Indian apparel industry coupled with a
nationwide reach that would enable it to reach a large quantum of
customers across various price points. Arvind has products with a price
range starting from as low as | 400 to as high as | 15000, which provides
a variety of choices and entry points for each and every customer.
Exhibit 1: Everything for everyone..!!!
Mens Wear
Formal Casual Denim
Kids Wear
(|44000 cr / $8 bn)
Brands
Inner Wear
(|18000 cr / $3 bn)
Men Women Brands
Women Wear
(|95000 cr / $15 Bn)Mkt. Size (|105000 cr / $18 bn)
Source: Company, ICICIdirect.com Research
Over a period of time, Arvind has strategically built up its brand portfolio,
which includes a blended combination of mass brands, entry level
brands, premium brands and super premium brands. With this
combination, the company manages to capture customers across the
income pyramid. For menswear, it has entry level brands like Excalibur
and Cherokee and power brands like Arrow, US Polo and Flying Machine.
For women, it has brands like Elle and Karigari. For kidswear, it has
association with major brands like The Children’s Place (TCP) and GAP for
kids. Furthermore, brands like Tommy Hilfiger and GAP are available
across categories. Also, in the innerwear segment, the company is well
positioned with brands like Hanes & Tommy Hilfiger.
ICICI Securities Ltd | Retail Equity Research Page 4
Ethiopia plant to be commissioned from October onwards
The growth in the textiles segment for FY17 was mainly fuelled by growth
in the garmenting segment. Revenues from the garmenting segment
grew at a robust rate of 27.8% YoY to | 1125 crore. The company expects
ramping up of the Ethiopia plant by Q2FY18.
For FY17, revenues from woven rose fabric rose 10.1% YoY to | 2212
crore led by growth in volumes by 8.5% YoY to 127 mn metre whereas
average price improved marginally at | 169. Revenues from Denim de-
grew 1.3% YoY to | 1841 crore.
Arvind plans to leverage its manufacturing capabilities by aggressive
forward integration in the brand & retail space. It has been focusing on
international bridge to premium brands in India. Currently, its power
brands comprise US Polo, Tommy Hilfiger, Flying Machine & Arrow.
Overall, the B&R segment registered stellar growth of 45% CAGR in FY12-
16. Revenues of the B&R segment have grown from 22% in FY11 to 31%
in FY17. The B&R segment grew 26% YoY to | 2902 crore in FY17.
‘Power’ brands (excluding Tommy Hilfiger) grew 23% YoY to | 1678 crore
(3.2% LTL). Also, “Unlimited” reported significant growth of 16% YoY.
LTL for Unlimited branded stores grew 28% in FY17.
Exhibit 2: Segment wise revenue
27% 27% 28% 26% 33% 32% 29% 30% 28% 29% 30%31%
33%
26% 32% 33%34% 31% 36% 39%
4% 4% 3% 4% 4% 5% 6% 7% 6% 5% 4% 6%9%
0%6% 7% 7%
5% 7% 7% 7%
54%
74%70% 70%
68%70%
63% 62% 64% 65%
67%67% 64% 61%
67% 68%
61% 60% 61% 62%57%
22%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY11
FY12
FY13
FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
FY17E
FY18E
FY19E
Textiles B&R Others
Source: Company, ICICIdirect.com Research
Exhibit 3: New reporting segment-wise
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5
Technical textiles - future ahead
After the recent stake dilution, the company now intends to focus on the
textile division with major thrust in the field of “advanced material”
(erstwhile technical textiles). Technical textiles has immense potential,
particularly in developing countries. India currently accounts for less than
5% of the world technical textile production (value). Indian technical
textile industry has grown at a CAGR of 12% in 2008-16 from | 36755
crore to | 92499 crore. The growth has been driven by higher domestic
consumption and increased exports. Though still in the nascent stage,
Arvind has been constantly building on the technical textile business and
has been looking for newer opportunities for joint ventures with global
companies to either bring in technology or access to international
customers. As of FY16, the company had made investments of ~| 200
crore. The management believes that due to its varied application and
utility, technical textiles would catapult Arvind to the high growth phase.
Focus on specialty retail store
The management of ALBL is keen on developing “Specialty retail”
channel. Formats under the specialty retail would include multi-offerings
under Unlimited, TCP, Aeropostale, GAP and Sephora. The company is
focusing on setting up more speciality retail stores, which would
contribute ~30% of the brand & retail revenue in FY18. The management
expects to break even from this segment in three years of its operations
and generate positive EBITDA in the range of 7-9% by FY22.
Nnow.com: Arvind’s foray into omni-channel play
In the quest to upgrade customer experience through Omni channel and
leverage its global brands on a digital platform Arvind has launched
‘nnnow.com’, which provides access to a complete range of Arvind
brands online. The current stores pan-India are acting as warehouses for
the online platform. Approximately, 40-50% of the online business is
fulfilled through its own stores in the vicinity. Investments made in Arvind
internet for FY17 were around | 55-60 crore.
Unlimited to take charge of Megamart; LTL of 28% impressive FY17
To counter the decline in margins, the management has repositioned
Megamart from a discount store to value retail with a higher proportion of
private labels. The Megamart was rechristened Unlimited, which would
not take into account that Arvind’s value retail business has been
struggling with sluggish revenue growth and low margins over the last
couple of years. The strategy is to attract customers by offering discounts
on reputed brands like Arrow, Park Avenue, Van Heusen and try to
convert them into buying its own private labels. Also, several small stores
have been closed while some large format stores have been opened
resulting in a reduction in the number of “Unlimited” stores from 216 in
FY12 to 86 stores in as on FY17.
The large format “Unlimited” stores have been positioned as a size of
10000 sq ft per store. Arvind currently has ~20% area under the power
Unlimited format and is planning to scale it up to 50% in the next two
years. The shift in favour of large format stores has led the area per store
for Unlimited to increase from 3100 sq ft in FY12 to 8446 sq ft in FY17.
The repositioning of Unlimited as value retail is expected to boost
revenue growth and enhance margins, going ahead.
ICICI Securities Ltd | Retail Equity Research Page 6
Valuation
Standalone business valued at 3.5x FY19 EV/EBITDA
Given the company’s expertise in manufacturing garments, coupled with
its positioning as the most preferred franchisee/distribution partner in
India, it is poised to benefit from an increase in apparel demand. Arvind’s
standalone revenue, which includes textiles and garments, grew at a
CAGR of 17% in FY11-16. Majority of this growth was driven by growth in
its fabric division, which grew at 16% CAGR in FY11-16. The increase in
fabrics revenues was mainly supported by 16% CAGR in woven, followed
by denim revenues, which grew at a modest CAGR of 4%.
Apart from fabrics, the company manufactures garments for brands like
Tommy Hilfiger, Calvin Klein, H&M, M&S, FCUK and Jack & Jones.
Revenues from the same grew at a CAGR of 17% in 2012-16. Over the
past few years, the company’s investments in augmenting its garmenting
capacities were insignificant. Arvind now intends to double its garmenting
capacity and has targeted 40 million capacity by 2020. Further, currently
only 7% of fabrics produced are used for production of garments that the
company intends to increase to 25%. With the enhancement of capacity,
standalone revenues would be mainly driven by garments. Garment
revenues have increased at a CAGR of 17% in 2012-16, which is further
expected to grow at a CAGR of ~20% in FY16-19E. Furthermore,
additional investments in new segments like technical textiles will drive
standalone revenues. We believe the standalone business has different
dynamics and has very different working capital cycle. Thus, we value the
standalone business on the basis of EV/EBITDA. We roll over the year and
value the standalone business at 3.5x FY19E EV/EBITDA.
Exhibit 4: Peer comparison for standalone business….
Figures (Rs crs)
Company Price Sales EBIDTA OPM PAT PAT % FY17E FY18E FY19E
Nandan Denim 120.0 1,156.7 191.2 16.5 63.3 5.5 4.2 3.7 3.3
KPR Mills 580.0 2,500.4 469.6 18.8 210.1 8.4 8.5 9.1 8.2
Vardhman Textiles 1,224.0 6,723.3 1,401.8 20.8 578.6 8.6 6.8 6.1 6.0
Average EV/EBIDTA 6.5 6.3 5.8
FY16 EV/EBIDTA
Source: ICICIdirect.com Research
Peers are quoting at a multiple of 6x FY18 EV/EBITDA but Arvind’s lower
focus on the same warrant our lower multiple of 3.5x EV/EBITDA. We
arrive at an SOTP value of the standalone business at | 31/share.
Exhibit 5: Valuing standalone business….
SOTP
Arvind Standalone
Target EV/EBITDA (x) 3.5
EBITDA (FY19E) 877.4
Net Debt 2,274.5
Enterprise Value (| Crore) 3,070.9
Target Market cap Core business (| crore) 796.4
Value/Share 31
Source: ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Brands & retail business - Recent deal to re-rate valuations at 2.5x
The theme around brands and positioning apparel as a ‘bridge to luxury’
segment has seen only a handful of players like Madura and Page getting
it right and being successful. The growth from branded apparel has been
lumpy with close to 200 international brands currently present in the India
fashion segment. Currently, Arvind has four power brands with each
having a turnover of ~| 2700 crore. The company estimates that each of
these brands would be scaled up to | 5000 crore. Over a decade, the
company believes it has added sufficient number of brands and now
wants to focus on its monetisation. The recent restructuring of Megamart
and closure of unsuccessful ventures like Debenhams and Next affirm the
management efforts to focus on profitable growth.
In addition, garmenting capabilities of the company position it as the most
preferred partner in India. Majority of brands in India, though not
profitable, are targeting revenue growth. However, profitability will creep
in once significant scale is achieved. To quote the management, “When a
brand attains a turnover of | 100-150 crore it gets out of negative EBITDA.
By the time it touches | 250 crore, RoCE becomes attractive. By the time
it gets to | 350 crore, a brand makes tonnes of money”. With the currently
successful launch of GAP store and target audience for Aeropostale, it is
well poised to create a number of powerbrands by 2020. We believe that
one of the brands would be converted into a powerbrand in 2018. On
account of this, powerbrand revenues are expected to grow at 33% CAGR
while due to the shift, growth of other brands would be lower at 11%
CAGR in 2015-19. We believe this business would be valued on the basis
of sales the company is able to achieve and following this, the estimated
market capitalisation it would demand. We value its brands & retail
business using the market capitalisation to sales method. Thus, we value
the company at an average multiple of 2.5x and arrive at a value of | 449
per share.
Exhibit 6: Peer comparison brands & retail business….
Figures (Rs crs)
Company
Market
Capitalization FY15 FY16 FY17E FY18E FY19E FY17E FY18E FY19E
Kewal Kiran 2,164.8 405.1 453.1 521.9 605.4 665.9 4.1 3.6 3.3
Monte Carlo 880.1 581.1 620.0 686.1 845.4 929.9 1.3 1.0 0.9
Raymond 3,162.1 5,332.6 5,594.7 5,963.1 6,533.2 7,186.5 0.5 0.5 0.4
Trent 8,440.4 2,496.1 2,353.3 2,997.5 3,793.5 4,172.9 2.8 2.2 2.0
Average Mcap/Sales 2.2 1.8 1.7
Sales Market Cap/Sales
Source: ICICIdirect.com Research
Exhibit 7: Valuing brands & retail business….
SOTP
Arvind Lifestyle & Brands
Target Market Cap/Sales (x) 2.5
Sales (FY19E) 4,593
Market Capitalization (FY19E) 11,578.9
No. of Shares 25.8
Price target (|) 449
Source: ICICIdirect.com Research
Consolidated valuation
Applying the EV/EBITDA multiple of 3.5x to its standalone business and
market capitalisation to sales multiple of 2.5x to its brands & retail
business, we arrive at a consolidated target price of | 480/share. We have
a BUY recommendation on the stock.
ICICI Securities Ltd | Retail Equity Research Page 8
Recommendation history vs. Consensus
150
200
250
300
350
400
450
500
Apr-17Feb-17Nov-16Sep-16Jun-16Apr-16Jan-16Nov-15Aug-15Jun-15Apr-15
(|
)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
(%
)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date Event
Dec-04 Arvind Brands Ltd made subsidiary company of Arvind
Jul-10 Launches The Arvind Store and its first major real estate project
Oct-11 Sets up joint venture for marketing Tommy Hilfiger brand
Aug-12 Signs distribution agreement with Billabong Arvind acquires India operations of Debenhams, Next, Nautica
Sep-13 Signs agreement for licenses of Hanes Enters long term licensing agreement with Iconix Lifestyle India
Oct-14 Buys 49% stake in Calvin Klein in India Set up joint venture (JV) with Goodhill Corporation of Japan for launch of formal suits
May-15 Launches the first GAP store in Delhi; the company ties up with American specialty retailer - Aeropostale
Jul-15 Reports Q1FY16 results with 6% growth in revenues; brands & retail revenues at | 527 crore
Oct-15 Reports Q2FY16 results in line with estimates. Textiles grew by 5% YoY and Brands & Retail grew by 9% YoY
Feb-16 Reports Q3FY16 results in line with expectation. Textiles remained stagnant and brand & retail grow 12%
May-16 Launch of nnnow.com
Aug-16 Reports Q1FY17 results in line with expectation. Textiles grew by 13%; brand & retail grew by 26%
Oct-16 Reports Q2FY17 results. Stake sale of 10% to "Multiples" at | 740 crore in ALBL. Revenues grew by 19% YoY; Brands & Retail grew by 33% YoY, textile grew by
9%
Jan-17 Reports Q3FY17 results with revenues growth of 15% YoY; Brands & Retail grew by 25% YoY, textile grew by 8%. Debt reduced to | 2780 crore
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Investor Name Latest Filing Date % O/S Position Change (m)
1 Aura Securities Pvt. Ltd. 31-Mar-17 36.97% 95.6 -1.8
2 Life Insurance Corporation of India 31-Mar-17 4.23% 10.9 0.0
3 Multiples Alternate Asset Management Private Limited 31-Mar-17 4.18% 10.8 0.0
4 Dimensional Fund Advisors, L.P. 28-Feb-17 3.54% 9.1 4.5
5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 2.53% 6.5 -0.1
6 AML Employees Welfare Trust 31-Mar-17 2.45% 6.3 0.0
7 Kotak Mahindra Asset Management Company Ltd. 28-Feb-17 2.27% 5.9 0.4
8 Sundaram Asset Management Company Limited 31-Mar-17 1.89% 4.9 0.0
9 Lalbhai Group 31-Mar-17 1.60% 4.1 0.0
10 Reliance Nippon Life Asset Management Limited 28-Feb-17 1.41% 3.6 0.0
(in %) Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Promoter 43.8 43.8 43.8 43.8 43.1
FII 22.6 22.9 22.5 22.6 24.8
DII 16.4 16.1 16.2 16.4 15.3
Others 17.2 17.2 17.5 17.2 16.8
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor Name Value Shares Investor Name Value Shares
Dimensional Fund Advisors, L.P. 25.6 4.5 Norges Bank Investment Management (NBIM) -13.9 -2.7
Avadh Material And Equipment Suppliers Pvt. Ltd. 4.9 0.8 Aura Securities Pvt. Ltd. -11.0 -1.8
Kotak Mahindra Asset Management Company Ltd. 2.4 0.4 Lalbhai (Sanjaybhai Shrenikbhai) -4.9 -0.8
BlackRock Asset Management North Asia Limited 1.8 0.3 Amundi Hong Kong Limited -2.8 -0.5
Jyske Invest Fund Management A/S 1.3 0.2 Shah (Jayesh Mohanlal) -2.8 -0.5
BUY SELL
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Total operating Income 8,010.6 9,235.5 10,516.2 11,841.7
Growth (%) 2.0 15.3 13.9 12.6
Raw Material Expenses 3,466.6 4,196.5 4,732.3 5,240.0
Employee Expenses 898.1 1,096.3 1,293.6 1,494.1
Manufacturing & Other Expenses 2,685.1 2,986.5 3,354.7 3,736.9
Project Expenses 9.7 12.9 12.7 14.4
Total Operating Expenditure 7,059.5 8,292.2 9,393.3 10,485.3
EBITDA 951.1 943.4 1,122.9 1,356.4
Growth (%) (0.8) 19.0 20.8
Depreciation 240.5 297.1 312.6 338.5
Interest 358.6 288.4 280.3 270.0
Other Income 82.1 78.0 81.9 86.0
PBT 434.0 435.9 611.9 833.8
Growth (%) (13.0) 0.4 40.4 36.3
Total Tax 124.6 99.7 150.5 206.0
PAT (adj. exceptional gains/loss) 316.1 320.1 451.4 617.9
Growth (%) (7.3) 1.2 41.0 36.9
EPS (|) 12.3 12.4 17.5 23.9
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Profit before Tax 435.4 417.8 601.9 823.8
Add: Depreciation 240.5 297.1 312.6 338.5
(Inc)/dec in Current Assets 910.1 (418.2) 33.3 (538.1)
Inc/(dec) in CL and Provisions 94.2 100.4 90.5 218.5
Taxes Paid (124.6) (99.7) (150.5) (206.0)
Interest on borrowings 358.6 288.4 280.3 270.0
CF from operating activities 1,914.2 585.9 1,168.2 906.9
(Inc)/dec in Investments (366.7) 147.1 (27.7) (30.4)
(Inc)/dec in Fixed Assets (369.4) (443.8) (451.6) (519.2)
(Inc)/dec in Intangible Assets 185.2 (33.5) (8.9) (9.5)
Others (2.7) 2.6 39.0 -
CF from investing activities (553.5) (327.6) (449.2) (559.1)
Issue/(Buy back) of Equity - 0.1 (0.1) -
Inc/(dec) in loan funds 91.2 (666.3) (100.0) (100.0)
Dividend paid & dividend tax 94.8 94.9 94.8 94.8
Interest paid & Others (1,569.2) 306.0 (691.2) (306.6)
CF from financing activities (1,383.1) (265.3) (696.5) (311.8)
Net Cash flow (22.4) (7.0) 22.5 36.0
Opening Cash 83.3 60.9 53.9 76.4
Closing Cash 60.9 53.9 76.4 112.5
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17E FY18E FY19E
Liabilities
Equity Capital 258.2 258.4 258.2 258.2
Reserve and Surplus 2,388.2 3,309.8 3,320.3 3,868.3
Total Shareholders funds 2,646.4 3,568.2 3,578.6 4,126.6
Total Debt 3,487.9 2,821.6 2,721.6 2,621.6
Deferred Tax Liability (124.0) (144.1) 47.1 47.1
Minority Interest / Others 123.5 231.9 165.0 172.0
Total Liabilities 6,133.8 6,477.5 6,512.2 6,967.2
Assets
Net Block 3,410.0 3,523.8 3,556.0 3,703.5
Capital WIP 98.3 95.7 56.7 56.7
Intangible WIP - - 4.4 4.4
Total Fixed Assets 3,508.2 3,619.5 3,612.7 3,760.2
Investments 423.8 276.7 304.3 334.8
Inventory 1,920.5 2,382.8 2,247.3 2,660.3
Debtors 768.2 813.9 1,382.9 1,622.2
Loans and Advances 331.3 164.6 181.0 217.3
Other Current Assets 594.6 902.3 474.4 284.7
Cash 60.9 53.9 76.4 112.5
Total Current Assets 3,675.4 4,317.5 4,362.1 4,896.9
Trade Payables 1,214.2 1,478.8 1,517.6 1,685.5
Provisions 56.3 57.5 66.2 69.5
Other Current Liabilities 203.1 199.8 187.5 274.2
Total Current Liabilities 1,473.6 1,736.2 1,771.3 2,029.1
Net Current Assets 2,201.8 2,581.3 2,590.8 2,867.8
Application of Funds 6,133.8 6,477.5 6,512.2 6,967.2
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17E FY18E FY19E
Per share data (|)
EPS 12.3 12.4 17.5 23.9
Cash EPS 21.6 23.9 29.6 37.0
BV 102.5 138.1 138.6 159.8
DPS 3.1 3.1 3.1 3.1
Cash Per Share 2.4 2.1 3.0 4.4
Operating Ratios
EBITDA Margin (%) 11.9 10.2 10.7 11.5
PBT Margin (%) 5.4 4.5 5.7 7.0
PAT Margin (%) 3.9 3.4 4.3 5.2
Inventory days 87.5 94.2 78.0 82.0
Debtor days 35.0 32.2 48.0 50.0
Creditor days 55.3 58.4 52.7 52.0
Return Ratios (%)
RoE 11.9 9.0 12.6 15.0
RoCE 11.6 10.1 12.9 15.1
RoIC 12.8 10.8 13.8 16.3
Valuation Ratios (x)
P/E 32.3 31.9 22.6 16.5
EV / EBITDA 14.4 13.8 11.5 9.4
EV / Net Sales 1.7 1.4 1.2 1.1
Market Cap / Sales 1.3 1.1 1.0 0.9
Price to Book Value 2.7 2.0 1.0 0.8
Solvency Ratios
Debt/EBITDA 3.7 3.0 2.4 1.9
Debt / Equity 1.3 0.8 0.8 0.6
Current Ratio 1.9 2.0 1.9 2.0
Quick Ratio 0.9 0.8 0.9 0.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
ICICIdirect.com coverage universe (Retail & Textile)
CMP M Cap
(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Kewal Kiran Clothing
(KEWKIR)
1800 1844 Hold 2225 55.1 69.2 65.9 32.1 25.6 26.8 21.0 21.7 18.5 30.5 23.8 29.9 22.7 23.8 23.0
Page Industries
(PAGIND)
14849 12000 Sell 16722 175.7 208.5 252.8 82.2 69.3 57.2 50.9 42.9 35.9 57.8 61.0 59.5 50.7 46.0 45.6
Rupa & Company 386 310 Buy 3198 8.3 9.2 10.4 35.7 32.2 28.5 18.9 17.7 16.1 22.9 20.4 20.3 17.9 16.9 16.8
Vardhman Textiles (MAHSPI)1322 1275 Hold 7628 92.6 155.8 125.3 14.0 11.2 10.4 7.7 6.8 6.6 16.1 19.1 18.7 15.0 26.0 16.2
Arvind Ltd (ARVMIL) 400 480 Buy 10329 12.3 12.4 17.5 33.2 32.4 22.9 14.5 13.9 11.5 11.6 10.1 12.9 11.9 9.0 12.6
RoCE (%) RoE (%)
Sector / Company
EPS (|) P/E (x) EV/EBITDA (x)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 12
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