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CMP 244.40
Target Price 266.00
ISIN: INE58G01011
APRIL 24th
, 2013
BOMBAY RAYON FASHIONS LTD Result Update: Q3 FY13
HOLDHOLDHOLDHOLD
Stock Data
Sector Textile
BSE Code 532678
Face Value 10.00
52wk. High / Low (Rs.) 278.90/220.00
Volume (2wk. Avg ) 28000
Market Cap ( Rs in mn ) 32896.24
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY12A FY13E FY14E
Net Sales 27349.60 30924.18 33552.73
EBITDA 7464.00 8403.22 9218.63
Net Profit 2065.10 1840.30 1713.13
EPS 15.34 13.67 12.73
P/E 15.93 17.88 19.20
Shareholding Pattern (%)
1 Year Comparative Graph
BSE SENSEX BOMBAY RAYON FASHIONS LTD
SYNOPSIS
We initiated coverage of Bombay Rayon
Fashions Ltd (BRFL) and set a target price of
Rs. 266.00 for Medium term Investment.
BRFL is a vertically integrated textile
company, engaged in the manufacture of a
wide range of fabrics and garments from
state of the art production facilities.
The company’s net sales registered a 16.81%
increase and stood at a record Rs. 8187.40
million from Rs. 7009.32 million over the
corresponding quarter last year.
BRFL is the largest garment manufacturers in
India with massive manufacturing facilities in
Maharashtra, Karnataka, Kerala and Tamil
Nadu.
The company’s net profit stood at a record
Rs. 472.00 million from Rs. 537.15 million
over the corresponding quarter last year.
Textile and Apparel Industry size is expected
to grow from INR 4.2 trillion to INR 10.5
trillion at a CAGR of 9.5% over the 2011-
2021.
Net Sales and Operating Profit of the
company are expected to grow at a CAGR of
14% & 18% over 2011 to 2014E respectively.
Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Bombay Rayon Fashions Ltd 244.40 32896.24 15.34 15.93 1.12 0.00
Garware Wall Ropes Ltd 43.05 1020.60 10.92 3.94 0.41 25.00
Mandhana Ind Ltd 250.85 8309.10 23.47 10.69 1.99 20.00
Sutlej Textiles Ltd 201.00 2195.30 60.58 3.32 0.79 50.00
Investment Highlights
Results updates- Q3 FY13,
Bombay Rayon Fashions Ltd achieved a turnover of Rs. 8187.40 million for the 3rd quarter of the current year
2012-13 as against Rs. 7009.32 millions in the corresponding quarter of the previous year. The company has
reported an EBITDA of Rs. 2119.10 millions and a net profit of Rs. 472.00 million against Rs. 537.15 million
reported respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs.
3.51 for the 3rd quarter as against an EPS of Rs. 3.99 in the corresponding quarter of the previous year.
Months DEC-12 DEC-11 % Change
Net Sales 8187.40 7009.32 16.81%
PAT 472.00 537.15 -12.13%
EPS 3.51 3.99 -12.13%
EBITDA 2119.10 1873.11 13.13%
Expenditure :
Break up of Expenditure
Rs. Millions
Q3 FY13 Q3 FY12
Consumption of Raw Materials 5143.70 4237.30
Depreciation 649.70 568.50
Employees Cost 594.50 579.20
Other Expenditure 1148.30 662.90
Job Work Charges 404.70 349.90
Company Profile
BRFL is a vertically integrated textile company, engaged in the manufacture of a wide range of fabrics and
garments from state of the art production facilities. Apart from being the largest Shirt manufacturer in India, the
company has successfully evolved into a multi-fiber manufacturing company producing fabrics such as Cotton,
Polyester, Tencel, Modal, Lycra, Wool and various blends. The yarn dyed fabric, printing techniques, finishing,
processing, weaving, stitching are a mark of excellence making every piece of fabric perfect. With fabric
manufacturing facilities of 100 million meters per annum, garment manufacturing facilities of 60 million pieces
per annum, being expanded to 90 million pieces per annum and a strong employee base of around 38,000.
Bestseller group is one of the largest apparel player based out of Europe, owned by the Povlsen family, owns
37% in Bombay Rayon Fashions Limited. Bestseller present across 46 markets in Europe, the Middle East, Asia
and Canada through approximately 3,000 chain stores and 12,000 external multi brand stores.
Products
BRFL is today one of the most sought after brands in the Indian as well as International fashion markets.
Fabric
Bombay Rayon Fashions Limited is a part of an incredible range of fabrics. Fabrics offer an extensive range of
men’s styling. It is the leading Indian fabric manufacturers and suppliers in the Domestic markets as well as
International Fashion Export Industry.
Apparel
Apparels from Bombay Rayon Fashions Limited are a creative exploration of the same comfort brought in by our
fabrics. Comfortable, durable and stylish are the inherent qualities of the range of apparels available.
Retail
Guru, a renowned apparel brand in Italy has been a subsidiary of BRFL since 2008. Guru has stores in 18
countries around the World, including Italy, Spain, France, Germany, Holland, Belgium, Luxemburg, Greece,
England, Portugal, the Middle East, Turkey, Russia, Ukraine, Austria, Switzerland, the Canary Islands,
Scandinavia, China and India.
Trims
BRFL has set up an in-house state of the art button manufacturing unit, the Trims Division is today the largest
and most sophisticated Button Industry in India. This includes buttons for shirts, coats, outer wear, trousers and
fancy buttons. The buttons are pre dyed and free from banned elements like Azo, Lead, Cadmium, Phthalate and
meet the Oekotex-100 Class 1 standard.
Yarn
Yarn division is well known for Production of world class cotton yarn and knitted grey fabric, quality
consciousness, fair business practices, modernization, environmental consciousness, social awareness, ultra-
modern plant equipped with sophisticated high-tech machinery and high calibre personnel & a great work
culture. Yarn products of the company are 100 % Cotton Combed Yarn, 100 % Organic Yarn, 100% Organic Yarn
under fair trade and 100% cotton yarn under fair trade.
Bombay Rayon Fashions Limited has two yarn dyeing facilities at Doddaballapur in Bangalore and at Tarapur in
Maharashtra. BRFL is the largest garment manufacturers in India with massive manufacturing facilities in
Maharashtra, Karnataka, Kerala and Tamil Nadu.
Subsidiary Companies
• Bombay rayon Holdings Limited (BRHL)
• DPJ Clothing Limited, U.K.
• BRFL Europe B.V., Netherlands
• BRFL Italia S.r.l, Italy
• STI India Limited
• BRFL Bangladesh Private Ltd.
Financial Highlight
Balance sheet as at March31, 2012
(A*- Actual, E* -Estimations & Rs. In Millions)
FY12 FY13E FY14E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 1346.00 1346.00 1346.00
Reserves and Surplus 27978.60 29818.90 31532.02
Money Received against share warrant 493.10 0.00 0.00
Net worth (a) 29817.70 31164.90 32878.02
Non-Current Liabilities:
Long-term borrowings 13069.90 13462.00 13731.24
Deferred Tax Liabilities [Net] 2610.90 3603.04 4503.80
Long Term Provisions 111.80 159.87 209.43
Long term liabilities (b) 15792.60 17224.91 18444.47
Current Liabilities:
Short-term borrowings 19268.50 23892.94 27715.81
Trade Payables 4465.10 5420.63 6233.73
Other Current Liabilities 3437.30 3932.27 4443.47
Short Term Provisions 256.70 282.37 310.61
Current Liabilities © 27427.60 33528.21 38703.61
Total (a+b+c) 73037.90 81918.02 90026.11
ASSETS:
Non-Current Assets:
Fixed Assets:
Tangible Assets 37175.30 43318.99 48950.46
Intangible Assets 73.00 75.19 77.45
Capital work-in-progress 517.50 569.25 614.79
(d) 37765.80 43963.43 49642.69
Non Current Investments 1556.10 1559.21 1562.33
Long Term Loans and Advances 3601.00 2628.73 2076.70
(e) 5157.10 4187.94 3639.03
Current Assets:
Current Investments 128.00 131.84 135.80
Inventories 17731.00 20390.65 22323.05
Trade Receivables 4610.70 4656.81 4703.38
Cash and Bank Balances 1184.80 1481.00 1836.44
Short Term Loans and Advances 6457.70 7103.47 7742.78
Other Current Assets 2.80 2.88 2.94
(f) 30115.00 33766.65 36744.38
Total (d+e+f) 73037.90 81918.02 90026.11
Annual Profit & Loss Statement for the period of 2011 to 2014E
Value(Rs.in.mn) FY11 FY12 FY13E FY14E
Description 12m 12m 12m 12m
Net Sales 22548.36 27349.60 30924.18 33552.73
Other Income 234.91 143.00 89.60 92.29
Total Income 22783.27 27492.60 31013.78 33645.02
Expenditure -17139.72 -20028.60 -22610.56 -24426.39
Operating Profit 5643.55 7464.00 8403.22 9218.63
Interest -1452.06 -2215.30 -3037.59 -3705.86
Gross profit 4191.49 5248.70 5365.63 5512.77
Depreciation -1366.71 -2172.30 -2657.88 -3029.98
Profit Before Tax 2824.78 3076.40 2707.76 2482.79
Tax -557.79 -1012.40 -867.46 -769.67
Profit After Tax 2266.99 2064.00 1840.30 1713.13
Extraordinary Items 0.00 1.10 0.00 0.00
Net Profit 2266.99 2065.10 1840.30 1713.13
Equity capital 1279.00 1346.00 1346.00 1346.00
Reserves 24512.37 27978.60 29818.90 31532.02
Face value 10.00 10.00 10.00 10.00
EPS 17.72 15.34 13.67 12.73
Quarterly Profit & Loss Statement for the period of 30 June, 2012 to 31 Mar, 2013E
Value(Rs.in.mn) 30-June-12 30-Sep-12 31-Dec-12 31-Mar-13E
Description 3m 3m 3m 3m
Net sales 7651.60 7143.40 8187.40 7941.78
Other income 47.40 15.20 12.00 15.00
Total Income 7699.00 7158.60 8199.40 7956.78
Expenditure -5662.60 -5078.10 -6080.30 -5789.56
Operating profit 2036.40 2080.50 2119.10 2167.22
Interest -661.10 -769.70 -783.80 -822.99
Gross profit 1375.30 1310.80 1335.30 1344.23
Depreciation -656.40 -650.10 -649.70 -701.68
Profit Before Tax 718.90 660.70 685.60 642.56
Tax -222.70 -224.90 -213.60 -206.26
Net Profit 496.20 435.80 472.00 436.30
Equity capital 1346.00 1346.00 1346.00 1346.00
Face value 10.00 10.00 10.00 10.00
EPS 3.69 3.24 3.51 3.24
Ratio Analysis
Particulars FY11 FY12 FY13E FY14E
EPS (Rs.) 17.72 15.34 13.67 12.73
EBITDA Margin (%) 25.03% 27.29% 27.17% 27.48%
PBT Margin (%) 12.53% 11.25% 8.76% 7.40%
PAT Margin (%) 10.05% 7.55% 5.95% 5.11%
P/E Ratio (x) 13.79 15.93 17.88 19.20
ROE (%) 8.79% 7.04% 5.91% 5.21%
ROCE (%) 12.28% 15.63% 16.99% 17.87%
Debt Equity Ratio 1.21 1.10 1.09 1.08
EV/EBITDA (x) 5.54 4.41 3.91 3.57
Book Value (Rs.) 201.65 217.86 231.54 244.26
P/BV 1.21 1.12 1.06 1.00
Charts
Outlook and Conclusion
� At the current market price of Rs.244.40, the stock P/E ratio is at 17.88 x FY13E and 19.20 x FY14E
respectively.
� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.13.67 and
Rs.12.73 respectively.
� Net Sales and Operating Profit of the company are expected to grow at a CAGR of 14% and 18% over 2011 to
2014E respectively.
� On the basis of EV/EBITDA, the stock trades at 3.91 x for FY13E and 3.57 x for FY14E.
� Price to Book Value of the stock is expected to be at 1.06 x and 1.00 x respectively for FY13E and FY14E.
� We recommend ‘HOLD’ in this particular scrip with a target price of Rs.266.00 for Medium to Long term
investment.
Industry Overview
The Indian Textiles Industry has an overwhelming presence in the economic life of the country. Apart from
providing one of the basic necessities of life, the textiles industry also plays a vital role through its contribution to
industrial output, employment generation, and the export earnings of the country.
The sector contributes about 14 per cent to industrial production, 4 per cent to the gross domestic product
(GDP), and 17 per cent to the country's export earnings. It provides direct employment to over 35 million people.
The textiles sector is the second largest provider of employment after agriculture. Thus, the growth and all round
development of this industry has a direct bearing on the improvement of the economy of the nation.
Market Size
The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as
export demand. Abundant availability of raw materials such as cotton, wool, silk and jute and skilled workforce
has made India a sourcing hub.
The most significant change in the Indian textile industry has been the advent of man-made fibres (MMF). India
has successfully placed its innovative range of MMF textiles in almost all the countries across the globe. MMF
production recorded an increase of 3 per cent during April-December 2012.
Cotton yarn production increased by about 13 per cent during December 2012 and by about 14 per cent during
April-December 2012. Blended and 100 per cent non-cotton yarn production increased by 6 per cent during
December 2012 and production increased by 1 per cent during the year April-December 2012.
Cloth production by mill sector increased by 18 per cent during December 2012 and increased by 19 per cent
during April-December 2012.
Cloth production powerloom has increased by 1 per cent during December 2012. During April-December 2012,
powerloom and hosiery production increased by 1 per cent and 10 per cent respectively and handloom
production remained at the same level during the same period. The total cloth production increased by about 1
per cent during December 2012 and increased by 4 per cent during April-December 2012.
The potential size of the Indian textile and apparel industry is expected to reach US$ 221 billion by 2021,
according to Technopak's Textile and Apparel Compendium 2012.
Investments
The textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed
and printed) attracted foreign direct investments (FDI) worth Rs 5656.42 crore (US$ 1.04 billion) during April
2000 to November 2012.
Some of the major investments in Indian Textile Industry are:
• British clothing brand Superdry plans to open 20 stores in India over the next five years, as per Mr James
Holder, Founder, Superdry
• The Export Promotion Council for Handicrafts (EPCH) is setting up an international lace trade centre at
Narsapuram in Andhra Pradesh (AP) with an outlay of Rs 15.33 crore (US$ 2.82 million)
• The Aditya Birla Group has signed an in-principle agreement to buy the assets of Ontario-based Terrace Bay
Pulp Mill for Rs 605 crore (US$ 111.62 million). The acquisition would be carried out through AV Terrace Bay
(Canada), a special purpose vehicle (SPV) in which two group companies, Grasim Industries and Thailand-
based Thai Rayon Public, would hold stake
• American apparel-maker, Tommy Hilfiger plans to add 500 stores in India over the next five years as part of
their expansion spree. Currently, Tommy Hilfiger operates 58 franchisee outlets and over 60 shop-in-shops
in other department stores
• Italian luxury apparel maker, Canclini Tessile is tying up with Tirupur-based Emperor Textiles to stitch its
shirts in India. The equal joint venture (JV) with Emperor Textiles will set up a separate manufacturing unit
in Tirupur to manufacture Italian fabric for domestic consumption
Government Initiatives
The Government of India has promoted a number of export promotion policies for the Textile sector in the Union
Budget 2011-12 and the Foreign Trade Policy 2009-14. It has also allowed 100 per cent FDI in textiles under the
automatic route.
Due to policy measures initiated by the Government in the recent past, the Indian textiles industry is in a
stronger position than it was in the last six decades. The industry which was growing at 3-4 percent during the
last six decades has now accelerated to an annual growth rate of 8-9 per cent in value terms.
Some of initiatives taken by the Government to further promote the industry are as under:
• The Ministry of Textiles is planning to lay more emphasis on the weaving sector under the Technology
Upgradation Fund Scheme (TUFS). The scheme, in its new form in the 12th Five-Year Plan, will include more
incentives for the sector
• Mr Anand Sharma, Union Minister for Commerce, Industry and Textiles, Government of India, has announced
a scheme on usage of agrotextiles in the North East region of India with a five year budget of Rs 55 crore (US$
10.13 million)
• The Apparel Training and Design Centre (ATDC) is setting up India's first 'Technology Innovation Research
Centre' at the ATDC-Training of Trainers' Academy, Gurgaon
• Maharashtra has attracted Rs 3,834 crore (US$ 707.24 million) investments in 411 new textile projects, due
to the new textile policy, as per Mr Arif Naseem Khan, Minister for Textile, Maharashtra
• The Government of India has cleared three FDI proposals-British footwear retailer Pavers England, US-based
clothing company Brooks Brothers and Italian jeweller brand Damiani-to set up stores in India under the
single brand retail policy
Road Ahead
Considering the overwhelming response to the scheme and opportunities for growth of the textiles industry and
in view of the consistent requests from State Governments, industry groups and entrepreneurs for setting up of
new textile parks, a note was submitted by the Ministry of Textiles for consideration of the Cabinet Committee on
Economic Affairs (CCEA) for approval of more Textile Parks. The CCEA has approved the proposal for sanction of
additional parks under Scheme for Integrated Textile Parks (SITP) to utilize the balance Rs 200 crore (US$ 36.89
million) in the 11th Five Year Plan and number of projects be limited in such a way that committed liability of the
new parks does not exceed Rs 200 crore (US$ 36.89 million) in the 12th Five Year Plan.
The CCEA also approved the revised guidelines enabling a two tier scrutiny and approval mechanism. The
proposals received for new parks have been examined by the Project Scrutiny Committee (PSC) comprising
representatives from Ministry of Finance, Planning Commission, Ministry of Commerce & Industry, and Ministry
of Environment and Forest (MoEF). After examination by PSC, 21 new textile park proposals have been approved
by the Project Approval Committee under the Chairmanship of Minister of Textiles.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
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