Kewal Kiran Clothing Ltd. share price target

Kewal Kiran’s Q3 revenue grew 27.5% y/y on Kraus’ acquisition. Standalone sales growth was muted at 0.8% y/y. Some of the revenue loss was on Lawman brand’s discontinuation from MBO channel.

Kewal Kiran’s H1 revenue grew 4.2% y/y, led by Kraus’ acquisition, though standalone sales fell 8.3% y/y on weak demand.

In line with our estimates, Kewal Kiran’s Q4 revenue grew 10% y/y, but the
19.3% EBITDA margin slightly lagged ARe. Better working capital led to
higher, Rs1.4bn/1.3bn, OCF/FCF generation (FY23 Rs0.8bn/0.5bn).

Kewal Kiran Clothing (KKC) delivered an impressive all-around performance. Volume growth outperformance (9% YoY) is likely to be one of the best in the sector. While revenue growth in jeans/trouser/t-shirts was healthy (12-15% YoY), muted performance in shirts (1% YoY) was due to winter-mix impact; higher offtake of winter wear lead top-wear.

Launches Killer Junior: kids' apparel and accessories

A beautiful tapestry

Kewal Kiran’s (KEWAL) revenue performance (at 15% YoY) was in the top quartile of the overall retail sector. It was driven by both higher volume and ASP. This was largely due to revenue outperformance in Jeans segment, which enjoys higher ASP (likely price hike), at portfolio level.

We like the continued outperformance in Kewal Kiran Clothing’s (KKC) Killer franchise and the visibly higher aggression towards retail expansion in this format. Volume growth outperformance (16% YoY) is impressive, while realisation stayed muted due to decline in revenue from jeans (~50% revenue share).

We like the continued outperformance in Kewal Kiran Clothing’s (KKC) Killer franchise and the visibly higher aggression towards retail expansion in this format. Volume growth outperformance (16% YoY) is impressive, while realisation stayed muted due to decline in revenue from jeans (~50% revenue share).

We like the continued outperformance in Kewal Kiran Clothing’s (KKC) Killer franchise and the visibly higher aggression towards retail expansion in this format. Even though meaningful improvement (18% YoY vs 9% YoY in Q2FY23) in realisation is encouraging (benefits of price hikes and mix improvement), underperformance in volumes (-2% YoY vs 18% in Q2FY23) is a matter of concern.

Kewal Kiran Clothing’s (KEKC) Q2FY23 revenues increased 29% YoY to Rs2.3bn, implying a 3-year revenue CAGR of 11%.

Hence, KKCL's share price has dropped to | 275/ share from | 1375/share indices over the last five years, mainly on account of subdued revenue growth. However, we believe the company is well placed to benefit from a demand revival owing to strong brand portfolio and pan-India store and distribution network. It aspires to achieve double digit topline growth through accelerated store addition and...

Gross margin contracted 680 bps YoY to 41% but positive operating leverage led KKCL to report an EBITDA margin of 18.4% (up 170 bps YoY) EBITDA grew 2.9x YoY on a favourable base to | 32.3 crore. Consequently, PAT also grew 2.9x YoY to | 27 crore What should investors do? KKCL's stock price has appreciated by 60% in the last one year (three year CAGR of -7%). It has one of the best margin profiles among branded apparel players with a healthy b/s. We believe KKCL is well placed to benefit...

For Q3FY21, volumes were at 13.15 lakh units vs. 13.45 lakh units in Q3FY20. Higher discounting, unfavourable channel mix (e-commerce) led to average realisations declining 5% YoY to | 816/piece. Jeans continues to be an integral category with revenue contributing 45% of overall sales. Over the years KKCL has gradually diversified its product portfolio from jeans towards other categories (share of jeans down from ~70% in Q1FY17). During the quarter, casual shirts segment outperformed other categories, with positive sales growth and share in overall sales increasing 200 bps YoY...

With minimal social gatherings and people preferring to work from home, discretionary spending on categories such as jeans and shirts were significantly hit during the quarter. While the company has over the years gradually diversified its product portfolio from jeans towards other categories (share of jeans down from ~70% in Q1FY17 to 60% currently), still majority of revenues are derived from the jeans category. We expect the near term pain to sustain and the recovery to be elongated given the challenging scenario. We note that in the previous quarter (Q4FY20),...

For FY20, revenue growth was at 5% YoY to | 530.0 crore. The revenue growth for 9MFY20 was ~ 9% while revenue decline in Q4FY20 impacted the FY20 performance. Revenue growth was mainly driven by 5% volume growth to 53.2 lakh pieces with average realisation remaining flat at | 995 per piece. Prior to the Covid-19 impact in Q4FY20, the management had highlighted that the underlying market was weak, primarily on account of de-stocking at the distributor level owing to liquidity concerns. The advent of Covid-19 further exacerbated market condition due to store closures...