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August 17, 2017 | PM Securities
1)Quarter 1 witnessed de-stocking which resulted in off take deferment of certain customers which resulted in revenues decreasing by 12.35% YoY to 43.18 crores.
2)Even though there were no loss of customers, the company refrained from a couple of customers who were financially stressed.
3)The company also witnessed a sharp contraction in EBITDA margins due to higher raw material costs of
cotton, higher job works costs, and lower absorption of fixed costs on account of volume loss. The EBITDA
margin stood at 15.13% vs 22.38% YoY.
4)As the industry is yet to witness the commencement of restocking, the company has reduced its guidance of 63 million sales volume in FY18 to a flattish growth. (FY17 volumes stood at 56 million, Q1FY18 volumes stood at 12 million)
5)The company currently enjoys duty drawback of 7.5% (5.5% is the input tax) with additional ROSL (Rebate of State Levies) of 3.9% valid till 30th September 2017, post which the industry is expected to have further clarity on the rates. Any reduction in duty drawback or ROSL post September will result in further downside of estimates.
6)The management is seeing traction in sales Q3 onwards as it is a festive season which will lead to higher demand, and is hopeful of a pickup in restocking.
7)The company has expanded from 68 to 90 million metres and are confident to utilise full capacity by 2020 as demand improves in the next 3 years. Also, raw material price of cotton is expected to go down on account of good monsoon. Global expansion is underway and new stores in UAE and Europe to open soon.
8)Boutique Living, which is targeted as an aspirational brand in India is expected to clock revenues of 65-70 crores in the next 3 years as the management is bullish on Indian market.
9)FY18 capex stands at 75-80 crores and the management is waiting on a favourable textile policy for their Specialised Weaving Greenfield project so as to select the land in a state which offers them benefits.
Disclaimer
This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document.
Copyright © 2017 Pankaj Mangaldas Securities pvt. ltd. , All rights reserved.
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