This multibagger stock hits a new high, Brokerage is bullish for 52% upside

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KPR Mill Ltd is a mid-cap textile company with a market valuation of 19,309.07 cr. The company’s diversified business spotlights include white crystal sugar, yarn, fabrics and garments. The company also produces a wide variety of textile products, including compact, blended, carded, polyester and worsted yarns, ready-made knitted garments, fabrics and ready-made knitted garments. The shares of KPR Mill Ltd. ceased trading on the NSE on Friday at 564.50 per share, up 0.0089% from the previous close. At the current price, the stock is trading 26.59% below its 52-week high and 70.94% above its 52-week low on the NSE, where it hit a 52-week high of 769.00 on Jan 14, 2022 and a 52 week low of 330.23 on 23-Aug-2021. Edelweiss Broking Limited has set a call to buy on KPR Mill shares with a target price of INR 860 which would be a new high or an all-time high. Based on the current market price, the security has an upside potential of 52.34% to reach its target price.

The brokerage firm said in a note that “KPR Mill revenue increased 75.4% YoY (on a weak basis) and 9% QoQ to INR 1,585 cr (11% off). above our estimates), driven by strong growth across all segments. to reach INR 284 cr.In Textiles, Apparel was up 83% YoY (16% QoQ) at INR692cr, driven by the commissioning of a new garment factory and higher realization, while Yarns & Fabrics segment grew relatively slower at 42% YoY (-6% QoQ) at INR541cr due to higher captive utilization Gross margins contracted 40bps QoQ 40.5% due to higher cotton prices and transport costs. t, tight operating cost control led to a 15% overrun in EBITDA (INR 368 cr vs. our estimate of INR 321 cr). Thus, EBITDA margins remained stable sequentially at 23.2%. Due to higher depreciation, interest charges and taxes, PAT was only 5% above our estimate at INR 227 cr (up 35% YoY and 4% quarter-on-quarter).”

“Apparel segment volume was 36.7 million pieces, up 28% year-on-year due to: (a) the commissioning of a new capacity of 42 million pieces in November 2021 (total capacity of 157 million pieces) and (b) strong demand for garments in export markets with the opening of the economy. cotton and a 4x increase in transport costs, KPR took price hikes resulting in a 39% YoY (20% QoQ) increase in realization to INR 190/piece. In recent years, KPR’s average apparel realization has increased by approximately 50%, driven by aggressive price increases and improved product mix.We expect the apparel segment to continue its outperformance and post growth of 14% in FY22-24, driven by volume growth of 12%, despite the expected slowdown in export markets in H2FY22,” said Edelweiss Broking Limited.

“KPR commissioned 10,000 TCD of sugar and 230 KLPD of ethanol capacity during the quarter, bringing the total capacity to 20,000 TCD of sugar and 360 KLPD of ethanol. Usually, the first quarter is a seasonally weak quarter for sugar companies, however, with this addition of capacity, sugar/ethanol revenues grew more than 1.5 times per year and 27% year-over-year to reach 284 cr INR. At peak utilization, the sugar/ethanol plant would generate approximately INR 1,400 cr in annual revenue (50/50 sugar/ethanol mix). KPR expects the new sugar/ethanol plant to reach significant capacity by the end of FY23. As ethanol is a high-margin segment, we expect operating margins from the will improve by 260 basis points to 25.5% in fiscal year 22-24. deliver around 50% revenue CAGR at INR 1,430 cr in FY22-24,” the brokerage firm added.

“While we expected KPR Mill to also post strong Q2FY23 numbers, given profit warnings from global retailers amid US recession fears towards the end of the year, we believe that apparel exporters could see a contraction in their order books in H2FY23. apparel revenues in H2FY23 Nevertheless, we remain convinced that the apparel export theme is here to stay, driven by (a) the adoption of the China Plus 1 strategy by global retailers, (b) the strong likelihood India signing free trade agreements with Europe and the UK, (c) gaining market share from other competitive nations (Sri Lanka and Pakistan) and (d) adding new geographies s (Australia, Dubai, Japan and Latin America). To account for the expected slowdown in S2FY23, we have reduced our earnings estimates for FY23E and FY24E by 6% and 5%, respectively. We maintain a ‘BUY’ rating on KPR Mill with a revised target price of INR 860/share (former TP: INR 900/share), valuing it at 26x FY24E earnings,” research analysts said. ‘Edelweiss Broking Limited.

The stock has produced a multibagger return of 421% over the past three years and a multibagger return of 268.71% over the past five years. The stock has fallen 19.90% since the start of 2022, but has gained 47.04% over the past 12 months. At the current market price of 564.50 the stock is trading below the 5-day, 10-day and 100-day EMA and above the 20-day, 50-day and 200-day Exponential Moving Average (EMA).

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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