May 11, 2018
ICICI Securities Ltd | Retail Equity Research
Result Update
Branded apparel, garmenting to spur growth…
Consolidated revenues for the quarter grew 21% YoY to | 2990.0
crore. Strong growth in the brand & retail segment, which grew 28%
YoY to | 1071 crore, mainly due to inclusion of Tommy Hilfiger &
Calvin Klein in consolidated results, accelerated growth
The textiles segment reported decent revenue growth of 9.3% YoY to
| 1596.4 crore. Growth in textiles was led by 14% increase in the
woven segment to | 605 crore. Denim, garment segment reported
revenue growth of 3%, 9% to | 471 crore, | 353 crore, respectively
The positive impact of lower raw material expense (cotton prices
down 7.4% YoY to | 113/kg) was completely offset by a reduction in
average realisations due to a sharp appreciation of rupee and reduced
duty drawback rates. Subsequently, gross margins at the consolidated
level declined 240 bps YoY to 49%
Positive operating leverage, (employee and other expenses as a
percentage to sales, down 9 bps and 298 bps, respectively) resulted in
EBITDA margin expansion of 60 bps YoY to 9.8%. Absolute EBITDA
grew 29% YoY to | 291.7 crore. On the segmental front, EBITDA
margins for the brands and retail segment improved significantly from
5.7% in Q4FY17 to 8.3% in Q4FY18. EBITDA margins for the textile
segment remained flattish at 12.5% YoY
Lower other income (down 58% YoY to | 14.1 crore), coupled with
increase in tax rate (18.5% in Q4FY18 vs. 11.3% in Q4FY17), restricted
PAT growth. Resultant PAT grew 18.2% YoY to | 115.5 crore, highest
quarterly PAT
Significant improvement in B&R segment margin visible…
The brands, retail segment continued on its strong trajectory, with
revenues increasing 28% YoY to | 1071 crore. Excluding it, revenue
growth for the base portfolio was at 12% YoY (GST adjusted growth 16%)
to | 925 crore. Overall B&R LTL sales growth came in at -4%, with ‘Power
Brands’ and ‘Unlimited’ posting negative LTL sales growth of 8% and 2%,
respectively. Negative LTL growth was mainly owing to advancement of
EOSS in December, 2017. However, after weak growth in January and
February, March turned out to be a strong month with Power Brands,
Unlimited seeing LTL growth of 7%, 13%, respectively. The management
remains upbeat on the future outlook, with revenues from B&R expected
to increase 20-24%, with margin expansion of 100 bps in FY19.
Garmenting segment to be next leg of growth for textiles segment…
The next leg of growth for the textiles segment is expected to be driven
by: 1) enhancing the garmenting capacity from current 30 million pieces
to 45 million pieces and 2) increased focus on advanced material division
and sportswear. The management believes the advance material division
(technical textiles) offers an immense opportunity to scale up its revenues
from the current | 500 crore to | 1000 crore by FY20E. The management
has affirmed its capex guidance of | 1500 crore over the next three to four
years (| 500 crore capex expected to be incurred in FY19E) towards high
asset turnover business, which, in turn, should improve RoCE. With a de-
merger on the cards (listing expected in the next four to five months), we
believe Arvind would be able to efficiently channelise its resources to full
potential leading optimised results in the long term. We introduce FY20E
estimates and roll over our valuation to FY20E. We maintain BUY
recommendation on the stock with a revised target price of | 510.
Arvind Ltd (ARVMIL) | 430
Rating matrix
Rating : Buy
Target : | 510
Target Period : 12 months
Potential Upside : 19%
What’s changed?
Target Changed from | 480 to | 510
EPS FY19E Changed from | 19.1 to | 16.2
EPS FY20E Introduced at | 23.6
Rating Unchanged
Quarterly performance
| Crore Q4FY18 Q4FY17 YoY (%) Q3FY18 QoQ (%)
Revenue 2,990.0 2,465.9 21.3 2,705.8 10.5%
EBITDA 291.7 225.5 29.3 248.4 17.4%
EBITDA (%) 9.8 9.1 61 bps 9.2 57 bps
PAT 115.5 97.7 18.2 79.1 46.0%
Key financials
| Crore FY17 FY18E FY19E FY20E
Net Sales 9,236 10,826 12,375 14,030
EBITDA 943 965 1,182 1,483
Net Profit 320.1 315.8 419.2 608.3
EPS (|) 12.4 12.2 16.2 23.6
Valuation summary
FY17 FY18E FY19E FY20E
P/E (x) 34.7 35.1 26.5 18.2
Target P/E (x) 41.1 41.7 31.4 21.6
EV/EBITDA (x) 14.9 14.7 12.1 9.7
P / BV (x) 3.1 2.9 2.7 2.4
RONW (%) 9.0 8.3 10.1 12.9
ROCE (%) 9.9 8.8 10.6 13.2
Stock data
Particular Amount
Market Capitalization (| Crore) 11,120.7
Total Debt (FY18) (| Crore) 2,965.6
Cash (FY18) (| Crore) 65.5
EV (| Crore) 14,020.8
52 week H/L 478.5/353
Equity Capital (| Crore) 258.6
Face Value (|) 10.0
Peer Comparison
1M 3M 6M 12M
Raymond 7.9 15.7 16.3 42.7
Arvind 7.8 10.2 0.9 4.7
KPR Mill 4.8 -6.8 -7.9 -11.2
Kewal Kiran Cloth. -1.6 -0.5 -16.8 -9.2
Research Analyst
Bharat Chhoda
Cheragh Sidhwa
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
| crore Q4FY18 Q4FY18E Q4FY17 YoY (%) Q3FY18 QoQ (%) Comments
Revenue 2,990.0 NA 2,465.9 21.3 2,705.8 10.5 LTL: Power Brands (-) 8%: Unlimited: (-)2%: Overall (-) 4%
RM Cost 1,524.0 NA 1,198.0 27.2 1,318.4 15.6 A sharp reduction in duty drawback rates and rupee appreciation resulted in a
decline in gross margins
Employee Benefit Expenses 310.7 NA 258.5 20.2 320.5 -3.0
Other Expenditure 863.7 NA 784.0 10.2 818.5 5.5
Total Expense 2,698.3 NA 2,240.4 20.4 2,457.3 9.8
EBITDA 291.7 NA 225.5 29.3 248.4 17.4
EBITDA Margin (%) 9.8 NA 9.1 61 bps 9.2 57 bps Lower other expense results in marginal expansion
Depreciation 96.4 NA 82.7 16.5 93.3 3.3
Interest 67.4 NA 58.5 15.3 67.1 0.5
Other Income 14.1 NA 33.4 -57.8 12.2 15.5
PBT 142.0 NA 117.8 20.6 100.3 41.6
Total Tax 26.2 NA 12.3 113.4 11.2 133.5
Exceptional Item -0.8 NA -8.9 NM -10.6 -92.4 Exceptional expenses on account of retrenchment related compensation
Reported PAT (Incld Minority Int) 115.5 NA 97.7 18.2 79.1 46.0 Decline in other income and higher tax rate restricts PAT growth
Key Metrics Q4FY18 Q4FY17 YoY (%) Q3FY18 QoQ (%)
Textiles 1,596.4 1,460.5 9.3 1,534.4 4.0 Growth was mainly due to 14% growth in the wovens business. Denim and
garments grew 3% and 9%, respectively
Brand & Retail 1,071.2 839.9 27.5 957.6 11.9 Base portfolio (excluding TH & CK) revenue came in at 12%
Arvind Internet 5.3 2.7 95.9 1.8 191.8
Others 328.8 193.3 70.1 222.7 47.6
Less: Intersegment 11.7 30.5 -61.6 10.8 8.0
Source: Company, ICICI Direct Research
Change in estimates
(| Crore) Old New % Change Introduced
Revenue 10,826.1 11,829.0 12,375.2 4.6 14,030.1
EBITDA 965.0 1,203.4 1,182.2 -1.8 1,482.8
EBITDA Margin (%) 8.9 10.2 9.6 -62 bps 10.6
PAT 315.8 494.0 419.2 -15.1 608.3
EPS (|) 12.2 19.1 16.2 -14.9 23.6
FY19E
FY18E
FY20E
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 3
Details of de-merger
Arvind currently operates different businesses under divisions and
subsidiaries. As on FY17, Arvind has 22 subsidiaries (direct or indirect)
and five joint venture companies.
Exhibit 1: Consolidated structure to be divided to three independent listed companies…
Sr. No Name of the Company Subsidiary %
1 The Anup Engineering Limited Subsidiary 93.5
2 Arvind Lifestyle Brands Limited Subsidiary 100.0
3 Syntel Telecom Limited Subsidiary 100.0
4 Arvind Brands and Retail Limited Subsidiary 100.0
5 Arvind PD Composites Private Limited Subsidiary 51.0
6 Arvind Envisol Limited Subsidiary 100.0
7 Arvind Goodhill Suit Manufacturing Private Limited Subsidiary 51.0
8 Arvind OG Nonwovens Private Limited Subsidiary 74.0
9 Dholka Textile Park Private Limited Subsidiary 100.0
10 Arvind Garments Park Private Limited Subsidiary 100.0
11 Arvind Internet Limited Subsidiary 100.0
12 Arvind Beauty Brands Retail Private Limited Subsidiary 100.0
13 Arvind Foundation Subsidiary 100.0
14 Arvind Fashions Limited Subsidiary 89.7
15 Arvind Ruf & Tuf Private Limited Subsidiary 100.0
16 Arvind Premium Retail Limited Subsidiary 51.0
17 Arvind True Blue Limited Subsidiary 87.5
18 Arvind Worldwide Inc., USA Subsidiary 100.0
19 Arvind Textile Mills Limited, Bangladesh Subsidiary 100.0
20 Arvind Niloy Exports Private Limited, Bangladesh Subsidiary 70.0
21 Arvind Lifestyle Apparel Manufacturing PLC, Ethopia Subsidiary 100.0
22 Westech Advanced Materials Limited, Canada Subsidiary 51.0
23 Arya Omnitalk Wireless Solutions Private Limited Associate (JV) 50.0
24 Tommy Hilfiger Arvind Fashion Private Limited Associate (JV) 50.0
25 Arya Omnitalk Radio Trunking Services Private Limited Associate (JV) 50.0
26 Arudrama Developments Private Limited Associate (JV) 50.0
27 Calvin Klein Arvind Fashion Private Limited Associate (JV) 49.0
JV/Associate
Subsidiaries
Source: Company, ICICI Direct Research, Entities to be impacted on de-merger
Exhibit 2: Consolidated structure to be divided to three independent listed companies…
Source: Company, ICICI Direct Research
The de-merger would result in three independent listed entities. The
textile business, which includes denim, wovens, garments, technical
textiles, etc, would continue to be a part of Arvind Ltd. The branded
apparel business, which includes 15 brands (Tommy Hilfiger, USPolo,
Arrow, Flying Machine, Gap, Aeropostale, The Children Place (TCP),
Sephora, etc) will be de-merged into Arvind Fashion (AFL). The
consideration would be one share of AFL for every five existing Arvind
shares. In addition to AFL shares, the engineering division (including
Anup and recently formed Anveshan) would also be demerged. Anup
would be merged with Anveshan while the renamed listed entity would
be Anup Engineering. The consideration would be one share of Anup for
every 27 existing Arvind shares.
ICICI Securities Ltd | Retail Equity Research Page 4
Key indicators of independent entities…
Exhibit 3: Key indicators of de-merged entities…
Particulars Arvind Ltd.
Arvind
Fashions Ltd.
Anup Engineering
Limited
FY18 Revenue (in crs)
(Revenue growth)
| 6750 crore
(7%)
| 3852 crore
(33%)
| 224 crore
(21%)
FY18 EBITDA (in crs)
| 677 crore | 235 crore | 54 crore
EBITDA Margin 10.0% 6.1% 23.9%
Net Debt as on FY18 | 2578 crore | 745 crore Net Cash of | 46 crore
Shareholders Equity ~| 2551 crore | 1217 crore | 209 crore
Source: Company, ICICI Direct Research
Key conference call takeaways…
For FY19, the management has guided for 10% revenue growth for
the textiles segment, mainly driven by increased capacity for the
garmenting division. EBITDA margins for the textile segment are
expected to remain flattish on the back of lower duty drawback rates.
For B&R, the management expects topline growth of 20-24%, driven
by aggressive footprint expansion and healthy LTL growth. While
margins for B&R are expected to improve 100 bps despite an increase
in marketing spends
The management expects to incur | 500 crore capex towards the
textile segment and | 160 crore towards B&R in FY19E
Arvind is aggressively expanding the capacity of the garmenting
facility from current 30 million metre to 40-45 million metre. The
company is setting up a garmenting facility in Jharkhand (government
has recently announced subsidies for garmenting). Currently, ~8% of
fabrics are used for captive consumption for manufacturing garments.
This share is expected to increase to 25% over the next two to three
years
Consolidated debt has increased by | 147 crore to | 3112 crore, on
fist time consolidation of TH & CK and balanced funds blocked in GST.
The management expects debt to remain at similar levels, going
forward
The management highlighted that the denim business is expected to
remain under pressure owing to oversupply situation in the country
Debtors increased significantly in FY18 to | 1767 crore (up 117%) on
account of: 1) consolidation of TH&CK (| 180 crore), 2) | 135 crore
towards execution in water business segment and 3) increase in
credit period in the wholesale business. The management expects the
debtor days to reduce by 15 days in FY19
Currently, only three brands are reporting losses at the EBITDA level.
The same is expected to turn profitable by FY19
ICICI Securities Ltd | Retail Equity Research Page 5
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 4: 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, ICICI Direct 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 6
Exhibit 5: Consolidated revenue trend
7851
1877
1957
2034
2233
8011
2104
2331
2335
2409
9236
2475
2628
2706
2990
10826
12375
14030
0
2000
4000
6000
8000
10000
12000
14000
16000
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
FY18E
FY19E
FY20E
| c
rore
Source: Company, ICICI Direct Research
Exhibit 6: EBITDA and EBITDA margin trend
1013
228 260 258 260
951
244 232 236 226
943
207 212248
292
965
1182
1483
0
200
400
600
800
1000
1200
1400
1600
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
FY18E
FY19E
FY20E
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
EBITDA EBITDA Margin
Source: Company, ICICI Direct Research
Exhibit 7: Consolidated net profit
436
248
354
91 93109
48
341
58 7190 98
316
73 77 7398
320
57 6479
115
316
419
608
0
100
200
300
400
500
600
700
FY12
FY13
FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
FY18E
FY19E
FY20E
| cro
re
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 7
Valuation
Standalone capex to focus on high asset turnover garmenting segment
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 FY11-17. Majority of this growth was driven by growth in
its fabric division, which grew at 16% CAGR in FY11-17. The increase in
fabric 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 2012-17.
Over the past few years, the company’s investments in augmenting its
garmenting capacity and textile capabilities were insignificant. With the
recent demerger, the investments in expansion of its intention to double
its garmenting capacity to a targeted 40 million pieces by 2020. Further,
currently only 7% of fabrics produced are used for production of
garments. The company intends to increase to 25% by 2020 and 50% by
2022. With the enhancement of capacity, standalone revenues would be
mainly driven by garments. Garment revenues have increased at a CAGR
of 17% in 2012-17. This is further expected to grow at a CAGR of ~21% in
FY18-20E. 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.
The renewed focus on the cash gusher segment commands a re-rating on
the textile business. We value the standalone business on the basis of
EV/EBITDA and assign an industry average EV/EBITDA multiple of 6.0x
FY20E. Hence, we arrive at a targeted market capitalisation of | 2443
crore and value of | 95/share.
Exhibit 8: Valuing standalone business….
Arvind Standalone
Target EV/EBITDA (x) 6.0
EBITDA (FY20E) (| Crore) 803.1
Net Debt (| Crore) 2,335.2
Enterprise Value (| Crore) 4,778.3
Target Market cap Core business (| crore) 2,443.0
Value/Share (|) 95
Source: Company, ICICI Direct Research
Exhibit 9: Valuing Anup Engineering ….
Anup Engineering
Target EV/EBITDA (x) 10.0
EBITDA (FY18) (| Crore) 54.0
Net Debt -
Enterprise Value (| Crore) 542.2
Target Market cap Core business (| crore) 542.2
Value/Share (|) 21
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 8
Brands & retail business – stability to remain crucial…
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.
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 this business would be
valued on the basis of the sales that the company is able to achieve and
following this, the estimated market capitalisation that 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 2x
and arrive at a value of | 395 per share with a target market capitalisation
of | 10185 crore.
Exhibit 10: Valuing brands & retail business….
Arvind Lifestyle & Brands
Target Market Cap/Sales (x) 2.0
Sales (FY20E) 5,197
Market Capitalization (FY19E) 10,185.7
No. of Shares 25.8
Price target (|) 395
Source: Company, ICICI Direct Research
Consolidated valuation
Applying the EV/EBITDA multiple of 6.0x to its standalone business
(| 95/share) and market capitalisation to sales multiple of 2x to its brands
& retail business (| 395/share) and Anup Engineering at 10x EV/EBITDA
(| 21/share), we revise our consolidated price to | 510/share.
ICICI Securities Ltd | Retail Equity Research Page 9
Recommendation history vs. Consensus
20
70
120
170
220
270
320
370
420
470
520
May-18
Mar-18
Feb-18
Dec-17
Nov-17
Sep-17
Jul-17
Jun-17
Apr-17
Mar-17
Jan-17
Dec-16
Oct-16
Sep-16
Jul-16
Jun-16
Apr-16
Feb-16
Jan-16
Nov-15
Oct-15
Aug-15
Jul-15
May-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, ICICI Direct 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, ICICI Direct Research
Top 10 Shareholders Shareholding Pattern
Rank Investor Name Latest Filing Date % O/S Position Change (m)
1 Aura Securities Pvt. Ltd. 31-Mar-18 36.95% 95.6 0.0
2 Kotak Mahindra Asset Management Company Ltd. 31-Mar-18 4.35% 11.3 2.5
3 Life Insurance Corporation of India 31-Mar-18 3.26% 8.4 0.0
4 HDFC Asset Management Co., Ltd. 31-Mar-18 3.24% 8.4 3.0
5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-18 2.81% 7.3 2.2
6 Nordea Funds Oy 31-Dec-17 2.70% 7.0 -2.2
7 AML Employees Welfare Trust 31-Mar-18 2.45% 6.3 0.0
8 Reliance Nippon Life Asset Management Limited 31-Mar-18 2.43% 6.3 1.8
9 Dimensional Fund Advisors, L.P. 31-Mar-18 2.18% 5.6 0.0
10 Sundaram Asset Management Company Limited 31-Mar-18 2.06% 5.3 0.0
(in %) Mar-17 Jun-17 Sep-17 Dec-17 Mar-18
Promoter 43.1 42.9 42.9 42.9 42.9
FII 24.8 25.9 27.1 27.1 23.7
DII 15.3 13.8 14.1 13.8 18.1
Others 16.8 17.3 15.9 16.2 15.3
Source: Reuters, ICICI Direct Research
Recent Activity
Investor Name Value Shares Investor Name Value Shares
HDFC Asset Management Co., Ltd. 17.7 3.0 Nordea Funds Oy -15.8 -2.2
India Capital Management Ltd 16.3 2.8 Amundi Hong Kong Limited -6.4 -0.9
Kotak Mahindra Asset Management Company Ltd. 14.9 2.5 Baillie Gifford & Co. -2.7 -0.4
Franklin Templeton Asset Management (India) Pvt. Ltd. 13.1 2.2 Fidelity Management & Research Company -1.6 -0.3
Reliance Nippon Life Asset Management Limited 10.6 1.8 JM Financial Asset Management Pvt. Ltd. -1.1 -0.2
BUY SELL
Source: Reuters, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 10
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY17 FY18E FY19E FY20E
Total operating Income 9,235.5 10,826.1 12,375.2 14,030.1
Growth (%) 15.3 17.2 14.3 13.4
Raw Material Expenses 4,196.5 5,259.5 5,940.1 6,734.4
Employee Expenses 1,096.3 1,264.7 1,441.8 1,586.0
Manufacturing & Other Expenses 2,986.5 3,322.7 3,793.9 4,207.3
Project Expenses 12.9 14.2 17.2 19.6
Total Operating Expenditure 8,292.2 9,861.2 11,193.0 12,547.3
EBITDA 943.4 965.0 1,182.2 1,482.8
Growth (%) 2.3 22.5 25.4
Depreciation 297.1 359.3 399.0 438.9
Interest 288.4 257.9 266.6 268.1
Other Income 78.0 62.6 65.8 69.0
PBT 435.9 410.4 582.3 844.9
Growth (%) 0.4 (5.9) 41.9 45.1
Total Tax 99.7 74.6 163.0 236.6
PAT (adj. exceptional gains/loss) 320.1 315.8 419.2 608.3
Growth (%) 1.2 (1.3) 32.8 45.1
EPS (|) 12.4 12.2 16.2 23.6
Source: Company, ICICI Direct Research
Cash flow statement | Crore
(Year-end March) FY17 FY18E FY19E FY20E
Profit after Tax 320.1 315.8 419.2 608.3
Add: Depreciation 297.1 359.3 399.0 438.9
(Inc)/dec in Current Assets (453.5) (1,353.3) 181.0 (627.7)
Inc/(dec) in CL and Provisions 299.9 962.7 (487.5) 230.1
Others - - - -
CF from operating activities 463.5 284.6 511.8 649.5
(Inc)/dec in Investments 147.8 285.4 (5.5) (5.8)
(Inc)/dec in Fixed Assets (445.6) (759.8) (589.7) (592.9)
(Inc)/dec in CWIP 3.2 5.1 1.7 (1.0)
Others - - - -
CF from investing activities (294.6) (469.3) (593.5) (599.7)
Issue/(Buy back) of Equity 0.1 0.3 - -
Inc/(dec) in loan funds (853.2) 146.9 100.0 10.0
Others 677.1 49.1 (49.4) (68.7)
CF from financing activities (176.0) 196.3 50.6 (58.7)
Net Cash flow (7.0) 11.6 (31.1) (8.9)
Opening Cash 60.9 53.9 65.5 34.4
Closing Cash 53.9 65.5 34.4 25.5
Source: Company, ICICI Direct Research
Balance sheet | Crore
(Year-end March) FY17 FY18E FY19E FY20E
Liabilities
Equity Capital 258.4 258.6 258.6 258.6
Reserve and Surplus 3,309.4 3,524.2 3,901.5 4,449.0
Total Shareholders funds 3,567.8 3,782.9 4,160.2 4,707.6
Total Debt 2,965.6 3,112.5 3,212.5 3,222.5
Deferred Tax Liability (144.1) (149.8) (157.2) (165.1)
Minority Interest / Others 151.4 307.2 307.2 307.2
Total Liabilities 6,540.7 7,052.8 7,522.6 8,072.2
Assets
Gross Block 4,012.6 4,592.6 5,182.2 5,775.1
Less: Accumlated depreciation 607.7 967.0 1,366.1 1,805.0
Net Block 3,404.9 3,625.5 3,816.2 3,970.2
Capital WIP 94.8 89.7 88.0 89.0
Intangibles 148.9 328.7 328.7 328.7
Total Fixed Assets 3,499.8 3,715.3 3,904.2 4,059.2
Investments 396.0 110.6 116.2 122.0
Inventory 2,382.8 2,619.4 2,848.0 3,228.8
Debtors 813.9 1,767.0 1,288.4 1,460.7
Loans and Advances 584.7 533.8 587.2 645.9
Other Current Assets 564.4 778.8 794.4 810.3
Cash 53.9 65.5 34.4 25.5
Total Current Assets 4,399.6 5,764.5 5,552.4 6,171.2
Trade Payables 1,478.8 2,147.2 1,642.7 1,855.3
Provisions 64.5 87.6 92.0 96.6
Other Current Liabilities 360.2 631.5 644.1 657.0
Total Current Liabilities 1,903.6 2,866.3 2,378.8 2,608.8
Net Current Assets 2,496.1 2,898.2 3,173.6 3,562.4
Application of Funds 6,540.7 7,052.8 7,522.6 8,072.2
Source: Company, ICICI Direct Research
Key ratios
(Year-end March) FY17 FY18E FY19E FY20E
Per share data (|)
EPS 12.4 12.2 16.2 23.6
Cash EPS 23.9 26.1 31.6 40.5
BV 138.1 146.3 160.9 182.0
Cash Per Share 2.1 2.5 1.3 1.0
Operating Ratios
EBITDA Margin (%) 10.2 8.9 9.6 10.6
PBT Margin (%) 4.5 3.6 4.7 6.0
PAT Margin (%) 3.4 2.9 3.4 4.3
Inventory days 94.2 88.3 84.0 84.0
Debtor days 32.2 59.6 38.0 38.0
Creditor days 58.4 72.4 48.5 48.3
Return Ratios (%)
RoE 9.0 8.3 10.1 12.9
RoCE 9.9 8.8 10.6 13.2
RoIC 10.8 9.1 11.0 13.6
Valuation Ratios (x)
P/E 34.7 35.1 26.5 18.2
EV / EBITDA 14.9 14.7 12.1 9.7
EV / Net Sales 1.5 1.3 1.2 1.0
Market Cap / Sales 1.1 0.9 0.8 0.7
Price to Book Value 3.1 2.9 2.7 2.4
Solvency Ratios
Debt/EBITDA 3.1 3.2 2.7 2.2
Debt / Equity 0.8 0.8 0.8 0.7
Current Ratio 2.3 2.0 2.3 2.4
Quick Ratio 1.0 1.1 1.1 1.1
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 11
ICICI Direct Research coverage universe (Retail & Textile)
CMP M Cap
(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E
Kewal Kiran Clothing 1575 1775 Buy 1941 60.5 59.4 72.7 26.0 26.5 21.7 19.4 19.6 16.8 22.7 20.6 22.2 19.9 18.3 20.4
Page Industries
(PAGIND)
24000 22920 Hold 26769 238.7 297.2 395.7 100.5 80.7 60.7 57.9 46.2 35.2 51.6 54.3 60.1 40.0 40.5 44.1
Rupa & Company 425 530 Buy 3392 9.1 10.8 13.7 46.8 39.3 31.0 26.9 23.9 19.1 23.6 25.4 29.1 16.4 17.7 20.1
Vardhman Textiles 1223 1465 Buy 7024 179.0 99.1 144.1 6.8 12.3 8.5 7.2 9.8 6.9 14.5 10.7 15.0 23.0 11.8 15.0
Arvind Ltd 430 510 Buy 11120.7 12.4 12.2 16.2 34.7 35.1 26.5 14.9 14.7 12.1 9.9 8.8 10.6 9.0 8.3 10.1
RoCE (%) RoE (%)
Sector / Company
EPS (|) P/E (x) EV/EBITDA (x)
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 12
RATING RATIONALE
ICICI Direct Research endeavours to provide objective opinions and recommendations. ICICI Direct Research
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]
ICICI Direct 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 13
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