KPR Mill Ltd. share price target

Valuation and Risks: We believe Covid disruptions have put a dampening deny on the fortunes of KPR in the medium term.

Garment Business Continues to Flourish: Growth in garment division continues to be the backbone of KPR s growth withthe segment

Decision to cancel buyback post the announcement of taxation for the same in the budget and lower pickup in the garment business has resulted in correction in valuations.

Garment Division Grows Albeit Slower than Expected: Garment realizations have been on a steady rise over the last few years and for FY19, it rose ~ 9% to Rs. 143. The ramp up of Ethiopian plant is slower than expected (training and other logistical factors continue to delay the process).

Performance continues to improve; valuations should improve in thecoming quarters: Strong increase in exports, coupled with increased captive consumption of yarn and fabric led to revenue growth of 7.6% and PAT growth of 14.7% on YoY basis in Q3FY19.

Exports excel, capex plans on track: Garment export business thrives asvolumes increased by 15.36% (44.5Mn vs 37.6Mn) and realization by ~ 6% (Rs. 137.75 vs Rs. 129.78 in H1FY19).

Garment Division Rebounds: Garment volumes were up 27% on YoY basis and realizations have also bouncedback for the quarter improved by ~ 9% (on gross levels - Rs. 138/unit vs Rs. 127/unit in Q1FY18).

While ramping up of the garmenting division seemed like a significant positive catalyst for long term growth, it hit hurdles as orders accepted were for lower valueadded garment manufacturing. This is the result of stiff competition from lower cost nations such as Bangladesh.

KPR Mill Ltd. is a vertically integrated apparel manufacturing company in India, which produces Yarn, Knitted Fabric, Readymade Garments and Wind Power with its production facilities in Tamil Nadu, India. The company has 1,200 regular...

Demand and raw material prices impact Q3 performance: KPR managedgood revenue growth for its textile segment in the quarter (22% YoY) in comparison to corresponding quarters in the last 2 fiscals. However, EBIT margins were thelowest (14%) over the same period on account of higher raw material prices and tepid demand.