Arvind Ltd (ARVLIM) 390 - ICICI...

August 8, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Brands continue to create value…

Revenues for the quarter grew 18% YoY to | 2475 crore (I-direct

estimate: | 2328 crore). The growth was accelerated by higher growth

in brand & retail segment, which grew 22% YoY (up 40% including

Tommy Hilfiger & Calvin Klein) at | 673 crore (| 773 crore including TH

& CK). Power brands grew 15% YoY to | 417 crore. LTL growth was at

18% in power brands. Revenues for “Unlimited” grew 36% YoY with

LTL of 39%

Standalone textile business added to consolidated growth with

revenues of | 1557.4 crore (up 9.3% YoY). Garments accelerated the

standalone growth with 17% YoY rise in revenues to | 293 crore. In

addition to the same, wovens recorded growth of 4% to | 573 crore,

while Denim revenues grew 11% YoY to | 551 crore

Increase in RM costs (cotton prices up 22% YoY) impacted gross

margins, which declined 286 bps YoY to 54.3%. Higher employee

expenses (up 17% YoY) and other overheads (up 19% YoY) further

impacted EBITDA margins, which contracted 325 bps YoY to 8.4% (I

direct estimate: 9.5%). Subsequently, absolute EBITDA de-grew 15%

YoY to | 207 crore (I-direct estimate: | 221 crore)

Benefits for lower interest costs (down 31% YoY) came from a decline

in debt & lower taxation on account of deferred tax (19.7% vs. 31% in

Q1FY17) but were completely offset by higher depreciation expenses

(up 25% YoY) and lower other income (down 2% YoY). Reported PAT

was further impacted by exceptional expense of | 7 crore pertaining to

retrenchment, post which PAT was at | 56.8 crore. Excluding the

same, PAT was at | 63.7 crore (I-direct estimate: | 69 crore)

Consistent L2L in Unlimited – Signs of successful restructuring…

Growth in Unlimited remained robust, revalidating the business model

correction initiated over the past two years. Arvind has been constantly

reinventing this retail segment from an initially launched discounted retail

store to a value retail format. In order to shed its “discount store” image,

Arvind has rebranded its large format Megamart stores (>10000 sq ft) as

Unlimited. Apart from mass brands like Cherokee and Geoffrey Beene, the

management started offering premium brands like Arrow and US Polo. It

also started selling exclusive brands like Ruggers, Skinn, Elitus, Donuts,

Karigari, Mea Casa, Auburn Hill, Bay Island, Colt, Leisha and Edge.

Closure of unviable lossmaking stores led store count to reduce from 140

in FY15 to 81 stores in Q1FY18. Post completion of restructuring the

management intends to add 30-40 stores under this format and targets

revenue of | 800 crore for FY18 as compared to | 600 crore in FY17.

On track to achieve ambitious target $1 billion topline in B&R by 2020

Arvind plans to scale up its revenues to ~$1 billion (| 6500 crore) from

current | 2641 crore revenues in the B&R segment by 2020E.

Demonstrating revenue compounded quarterly growth rate (CQGR) of 7%

over the past nine quarters, we believe the management is on track to

achieve this ambitious target. It has guided to open 100 new retail stores

in FY18 under power brands (30 stores under each brand) and seven to

eight stores (five stores for Sephora and two or three stores of GAP)

under speciality retail segment. Enhanced retail coverage with benefits of

operating leverage and maturity of older stores will lead to better margins

resulting in higher earnings growth. We continue to believe that Arvind is

well positioned to capture a larger pie of the brand conscious Indian

market. Hence, we maintain BUY with a target price of | 480.

Arvind Ltd (ARVLIM) | 390

Rating matrix

Rating : Buy

Target : | 480

Target Period : 12 months

Potential Upside : 23%

What’s changed?

Target Unchanged

EPS FY18E Changed from | 17.5 to | 14

EPS FY19E Changed from | 23.9 to | 19.2

Rating Unchanged

Quarterly performance

| Crore Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)

Revenue 2,475.0 2,104.1 17.6 2,464.8 0.4

EBITDA 207.0 244.5 (15.3) 223.5 (7.4)

EBITDA (%) 8.4 11.6 -325 bps 9.1 -70 bps

PAT 56.8 73.3 (22.6) 96.9 (41.4)

Key financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 8,011 9,236 10,516 11,842

EBITDA 951 943 1,016 1,206

Net Profit 316.1 320.1 361.6 496.2

EPS (|) 12.3 12.4 14.0 19.2

Valuation summary

FY16 FY17 FY18E FY19E

P/E (x) 31.8 31.4 27.8 20.3

Target P/E (x) 36.6 36.2 32.0 23.3

EV/EBITDA (x) 14.5 13.8 12.7 10.6

P / BV (x) 2.7 2.0 0.9 0.8

RONW (%) 11.9 9.0 9.6 11.8

ROCE (%) 11.0 9.9 10.5 12.3

Stock data

Particular Amount

Market Capitalization (| Crore) 10,076.0

Total Debt (FY17) (| Crore) 151.4

Cash (FY17) (| Crore) 1,478.8

EV (| Crore) 8,748.7

52 week H/L 427 / 286

Equity Capital (| Crore) 258.4

Face Value (|) 10.0

Peer Comparison

1M 3M 6M 12M

Raymond (0.69) (2.78) 50.78 66.52

Arvind Ltd (1.84) (13.52) (4.06) 23.59

K P R Mill Ltd (1.28) 5.03 31.43 44.47

Kewal Kir.Cloth. (5.42) (6.02) (3.49) (10.00)

Research Analyst

Bharat Chhoda

[email protected]

Ankit Panchmatia

[email protected]

Cheragh Sidhwa

[email protected]


Variance analysis

| crore Q1FY18 Q1FY18E Q1FY17 YoY (%) Q4FY17 QoQ (%) Comments

Revenue 2,475.0 2,328.7 2,104.1 17.6 2,464.8 0.4 Growth remained supportive of brand & retail (+22% YoY excluding CK and

TH) and textile business (up 9% YoY)

RM Cost 1,130.7 1,094.5 901.1 25.5 1,195.6 -5.4 Increase in cotton prices resulted in higher RM expenses

Employee Benefit Expenses 311.6 271.9 265.6 17.3 258.9 20.3

Other Expenditure 825.8 744.7 692.9 19.2 656.8 25.7

Total Expense 2,268.0 2,111.1 1,859.7 22.0 2,241.3 1.2

EBITDA 207.0 217.6 244.5 -15.3 223.5 -7.4

EBITDA Margin (%) 8.4 9.3 11.6 -325 bps 9.1 -70 bps

Depreciation 86.3 82.9 69.1 25.0 82.7 4.4

Interest 61.4 55.6 89.1 -31.1 58.5 5.0 Decline in debt resulted in reduction interest expenses

Other Income 16.3 17.5 16.6 -2.0 28.4 -42.6

PBT 75.6 96.6 102.9 -26.6 110.6 -31.7

Total Tax 13.5 27.3 31.7 -57.3 13.1 3.6

Exceptional Item -6.9 NA -0.2 NM -8.9 -22.5 Exceptional expenses on account of retrenchment related compensation

Reported PAT (Incld Minority Int) 56.8 69.3 73.3 -22.6 96.9 -41.4 Higher other income and lower tax rate moderated the decline in PAT

Key Metrics Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)

Textiles 1,557.4 1,425.0 9.3 1,459.5 6.7 Growth was mainly due to 17% growth in the garments business and 11%

growth in denim

Brand & Retail 773.7 554.1 39.6 828.3 -6.6 Excluding Tommy Hilfiger and Calvin Klien, B&R revenues grew by 22% YoY.

Power brands grew by 15% YoY to | 417 crore

Arvind Internet 1.7 0.2 876.5 2.7 -38.7 With the launch of NNNow, the internet business is gaining traction

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Revenue 10,513.0 10,516.2 0.0 11,837.1 11,841.7 0.0 Continue to maintain revenue growth estimates

EBITDA 1,122.9 1,015.8 -9.5 1,356.4 1,206.2 -11.1

EBITDA Margin (%) 10.7 9.7 -102 bps 11.5 10.2 -127 bps Higher RM costs would led to tapering of margin estimates

PAT 451.4 361.6 -19.9 617.9 496.2 -19.7

EPS (|) 17.5 14.0 -19.9 24.0 19.2 -19.7 Resultant impact on PAT

FY18E FY19E



Key Takeaways from conference call

The wholesale channels for the textiles and B&R segment were

impacted in June on account of a disruption in supply chain due to

GST transition. The management expects normalcy to return in the

next couple of months

Under B&R segment, revenues from wholesale channels declined

80% YoY while revenues from the retail channel grew 50% YoY

mainly on account of advancement of EOSS

Garment capacity is currently operating at almost full utilisation levels.

Currently, it has capacity of 28 million pieces and expects to increase

its capacity by 12 million pieces in two phases. The first phase of 5

million pieces is expected to be operational by Q2FY18 while the

remaining is expected to ramp up by FY18. After the new capacity

comes on stream, the company expects to maintain 20%+ growth in

the garmenting segment.

The management has guided a cautious outlook for textiles margins

on the back of increase in cotton prices and appreciation of rupee

against other currencies

The management has maintained its revenue guidance for FY18 with

an overall revenue growth of 13%. The textile segment is expected to

register a revenue growth of 8% with B&R to the tune of 22-24%

The management is expected to invest US$6-7 million in FY18 vs.

US$10 million in FY17

The management intends to open 30-40 Unlimited stores, 100 brand

stores (30-40 stores in each brand) and eight to nine stores in

speciality retail format (Sephora: five stores and GAP: three to four

stores)

Unlimited is expected to register revenue growth of 33% YoY to

~| 800 crore and expected to breakeven at the EBITDA level by FY18

For FY18, capex is estimated at | 450 crore, of which | 150 crore is

expected to be incurred for the B&R segment while the rest is to be

spent on the textile division. The management is planning to fund the

entire capex through internal accruals while keeping debt in the books

at the current levels (~| 3000 crore)

The management expects power brands to continue on its strong

revenue trajectory of ~20% every year. The growth is expected to

fuelled by its distribution expansion and category expansion. The

company has recently launched US Polo innerwear and US Polo kids

which have witnessed strong traction.


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 1: 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)


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.


Ethiopia plant to be commissioned from October onwards

The growth in the textiles segment for FY17 was mainly fuelled by growth

in the garmenting segment. Revenues from the garmenting segment

grew at a robust rate of 27.8% YoY to | 1125 crore. The company expects

ramping up of the Ethiopia plant by Q2FY18.

For FY17, revenues from woven rose fabric rose 10.1% YoY to | 2212

crore led by growth in volumes by 8.5% YoY to 127 mn metre whereas

average price improved marginally at | 169. Revenues from Denim de-

grew 1.3% YoY to | 1841 crore.

Arvind plans to leverage its manufacturing capabilities by aggressive

forward integration in the brand & retail space. It has been focusing on

international bridge to premium brands in India. Currently, its power

brands comprise US Polo, Tommy Hilfiger, Flying Machine & Arrow.

Overall, the B&R segment registered stellar growth of CAGR 45% in FY12-

16. Revenues of the B&R segment have grown from 22% in FY11 to 31%

in FY17. The B&R segment grew 26% YoY to | 2902 crore in FY17.

‘Power’ brands (excluding Tommy Hilfiger) grew 23% YoY to | 1678 crore

(3.2% LTL). Also, “Unlimited” reported significant growth of 16% YoY.

LTL for Unlimited branded stores grew 28% in FY17.

Technical textiles - future ahead

After the recent stake dilution, the company now intends to focus on the

textile division with major thrust in the field of “advanced material”

(erstwhile technical textiles). Technical textiles has immense potential,

particularly in developing countries. India currently accounts for less than

5% of the world technical textile production (value). Indian technical

textile industry has grown at a CAGR of 12% in 2008-16 from | 36755

crore to | 92499 crore. The growth has been driven by higher domestic

consumption and increased exports. Though still in the nascent stage,

Arvind has been constantly building on the technical textile business and

have been looking for newer opportunities for joint ventures with global

companies to either bring in technology or access to international

customers. As of FY16, the company had made investments of around

| 200 crore. The management believes that due to its varied application

and utility, technical textiles would position Arvind in the league of high

growth phase.

Focus on specialty retail store

The management of ALBL is keen on developing “Specialty retail”

channel. Formats under the specialty retail would include multi-offerings

under Unlimited, TCP, Aeropostale, GAP and Sephora. The company is

focusing on setting up more speciality retail stores, which would

contribute ~30% of the brand & retail revenue in FY18. The management

expects to break even from this segment in three years of its operations

and generate positive EBITDA in the range of 7-9% by FY22.

Nnow.com: Arvind’s foray into omni-channel play

In the quest to upgrade customer experience through Omni channel and

leverage its global brands on a digital platform Arvind has launched

‘nnnow.com’, which provides access to a complete range of Arvind

brands online. The current stores pan-India are acting as warehouses for

the online platform. Approximately 40-50% of the online business is

fulfilled through its own stores in the vicinity. Investments made in Arvind

internet for FY17 were around | 55-60 crore.


Valuation

Standalone business valued at 3.5x FY19 EV/EBITDA

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

fabrics 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

capacities were insignificant. The company now intends to double its

garmenting capacity and has targeted 40 million capacity by 2020.

Further, currently only 7% of fabrics produced are used for production of

garments that the company intends to increase to 25%. 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, which is further expected to grow at a CAGR of ~20% in FY17-

19E. 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. Thus, we value the standalone business on the basis of EV/EBITDA.

We roll over the year and value the standalone business at 3.5x FY19E

EV/EBITDA.

Exhibit 2: Peer comparison for standalone business….

Figures (Rs crs)

Company Price Sales EBIDTA OPM PAT PAT % FY17 FY18E FY19E

Nandan Denim 149.0 1,220.4 189.9 15.6 56.7 4.6 4.8 4.2 3.8

KPR Mills 770.0 2,816.0 590.7 21.0 286.2 10.2 10.8 11.5 10.5

Vardhman Textiles 1,204.0 6,066.8 1,717.4 28.3 981.4 16.2 6.2 5.5 5.4

Average EV/EBIDTA 7.3 7.1 6.6

FY16 EV/EBIDTA

Source: ICICIdirect.com Research

Peers are quoting at a multiple of 6x FY18 EV/EBITDA but Arvind’s lower

focus on the same warrant our lower multiple of 3.5x EV/EBITDA. We

arrive at an SOTP value of the standalone business at | 31/share.

Exhibit 3: Valuing standalone business….

SOTP

Arvind Standalone

Target EV/EBITDA (x) 3.5

EBITDA (FY19E) 877.4

Net Debt 2,274.5

Enterprise Value (| Crore) 3,070.9

Target Market cap Core business (| crore) 796.4

Value/Share 31



Brands & retail business - Recent deal to re-rate valuations at 2.5x

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.

In addition, garmenting capabilities of the company position it as the most

preferred partner in India. 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 that

one of the brands would be converted into a powerbrand in 2018. On

account of this, powerbrand revenues are expected to grow at 33% CAGR

while due to the shift, growth of other brands would be lower at 11%

CAGR in 2017-19. We believe this business would be valued on the basis

of sales the company is able to achieve and, following this, the estimated

market capitalisation 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 2.5x and arrive at a value of | 449

per share.

Exhibit 4: Peer comparison brands & retail business….

Figures (Rs crs)

Company

Market

Capitalization FY15 FY16 FY17 FY18E FY19E FY17 FY18E FY19E

Kewal Kiran 2,060.3 405.1 453.0 488.4 488.4 618.2 4.2 4.2 3.3

Monte Carlo 1,049.6 582.6 621.5 584.1 584.1 789.6 1.8 1.8 1.3

Raymond 4,758.5 5,332.6 5,176.8 5,391.3 2,822.2 6,673.7 0.9 1.7 0.7

Trent 9,370.9 2,284.3 1,589.3 1,833.9 1,738.1 3,295.9 5.1 5.4 2.8

Average Mcap/Sales 3.0 3.3 2.1

Sales Market Cap/Sales


Exhibit 5: Valuing brands & retail business….

SOTP

Arvind Lifestyle & Brands

Target Market Cap/Sales (x) 2.5

Sales (FY19E) 4,593

Market Capitalization (FY19E) 11,578.9

No. of Shares 25.8

Price target (|) 449


Consolidated valuation

Applying the EV/EBITDA multiple of 3.5x to its standalone business and

market capitalisation to sales multiple of 2.5x to its brands & retail

business, we arrive at a consolidated target price of | 480/share. We have

a BUY recommendation on the stock.


Recommendation history vs. Consensus

150

200

250

300

350

400

450

500

Aug-17May-17Mar-17Dec-16Oct-16Aug-16May-16Mar-16Dec-15Oct-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, ICICIdirect.com 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


Top 10 Shareholders Shareholding Pattern

Rank Investor Name Latest Filing Date % O/S Position Change (m)

1 Aura Securities Pvt. Ltd. 31-Mar-17 36.97% 95.6 -1.8

2 Life Insurance Corporation of India 31-Mar-17 4.23% 10.9 0.0

3 Multiples Alternate Asset Management Private Limited 31-Mar-17 4.18% 10.8 0.0

4 Dimensional Fund Advisors, L.P. 30-Jun-17 3.13% 8.1 0.0

5 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Jun-17 2.68% 6.9 0.2

6 Kotak Mahindra Asset Management Company Ltd. 30-Jun-17 2.48% 6.4 0.0

7 AML Employees Welfare Trust 31-Mar-17 2.45% 6.3 0.0

8 Sundaram Asset Management Company Limited 31-May-17 1.83% 4.7 -0.1

9 Lalbhai Group 31-Mar-17 1.60% 4.1 0.0

10 Reliance Nippon Life Asset Management Limited 30-Jun-17 1.44% 3.7 0.6

(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17

Promoter 43.8 43.8 43.8 43.1 42.9

FII 22.9 22.5 22.6 24.8 25.9

DII 16.1 16.2 16.4 15.3 13.8

Others 17.2 17.5 17.2 16.8 17.3

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor Name Value Shares Investor Name Value Shares

Avadh Material And Equipment Suppliers Pvt. Ltd. 4.9 0.8 Aura Securities Pvt. Ltd. -11.0 -1.8

Reliance Nippon Life Asset Management Limited 3.3 0.6 Tata Asset Management Limited -6.1 -1.1

Franklin Templeton Asset Management (India) Pvt. Ltd. 1.1 0.2 Lalbhai (Sanjaybhai Shrenikbhai) -4.9 -0.8

Amundi Hong Kong Limited 1.2 0.2 Shah (Jayesh Mohanlal) -2.8 -0.5

Trilogy Global Advisors, LP 1.0 0.2 Driehaus Capital Management, LLC -1.3 -0.2

BUY SELL

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17 FY18E FY19E

Total operating Income 8,010.6 9,235.5 10,516.2 11,841.7

Growth (%) 2.0 15.3 13.9 12.6

Raw Material Expenses 3,466.6 4,196.5 4,837.4 5,388.0

Employee Expenses 898.1 1,096.3 1,293.6 1,494.1

Manufacturing & Other Expenses 2,685.1 2,986.5 3,354.7 3,736.9

Project Expenses 9.7 12.9 14.7 16.5

Total Operating Expenditure 7,059.5 8,292.2 9,500.3 10,635.5

EBITDA 951.1 943.4 1,015.8 1,206.2

Growth (%) (0.8) 7.7 18.7

Depreciation 240.5 297.1 321.6 345.6

Interest 358.6 288.4 272.2 262.7

Other Income 82.1 78.0 70.2 73.7

PBT 434.0 435.9 492.2 671.6

Growth (%) (13.0) 0.4 12.9 36.4

Total Tax 124.6 99.7 120.5 165.4

PAT (adj. exceptional gains/loss) 316.1 320.1 361.6 496.2

Growth (%) (7.3) 1.2 13.0 37.2

EPS (|) 12.3 12.4 14.0 19.2


Cash flow statement | Crore


Profit before Tax 435.4 417.8 482.2 661.6

Add: Depreciation 240.5 297.1 321.6 345.6

(Inc)/dec in Current Assets (308.8) (453.5) (87.5) (494.8)

Inc/(dec) in CL and Provisions 230.5 299.9 (30.4) 151.5

Taxes Paid (124.6) (99.7) (120.5) (165.4)

Interest on borrowings 358.6 288.4 272.2 262.7

CF from operating activities 831.5 750.0 837.6 761.3

(Inc)/dec in Investments (118.2) 147.8 (19.8) (20.8)

(Inc)/dec in Fixed Assets (412.0) (353.1) (275.6) (320.5)

(Inc)/dec in Intangible Assets (63.4) (33.5) 29.8 23.8

Others (2.9) 2.6 (19.1) (23.0)

CF from investing activities (596.5) (236.3) (284.7) (340.4)

Issue/(Buy back) of Equity - 0.1 (0.1) -

Inc/(dec) in loan funds 278.8 (853.2) (100.0) (100.0)

Dividend paid & dividend tax 79.0 74.6 74.6 74.6

Interest paid & Others (601.7) 257.6 (512.6) (386.7)

CF from financing activities (243.8) (520.8) (538.1) (412.0)

Net Cash flow (8.8) (7.1) 14.7 8.8

Opening Cash 69.7 60.9 53.9 68.6

Closing Cash 60.9 53.8 68.6 77.4


Balance sheet | Crore


Liabilities

Equity Capital 258.2 258.4 258.2 258.2

Reserve and Surplus 2,388.2 3,309.8 3,505.8 3,952.3

Total Shareholders funds 2,646.4 3,568.2 3,764.0 4,210.5

Total Debt 3,818.8 2,965.6 2,865.6 2,765.6

Deferred Tax Liability (124.0) (144.1) (151.3) (158.9)

Minority Interest / Others 55.6 151.4 159.0 167.0

Total Liabilities 6,396.8 6,541.1 6,637.3 6,984.2

Assets

Gross Block 3,659.5 4,012.6 4,288.2 4,608.6

Less: Accumlated depreciation 369.4 607.7 929.3 1,274.9

Net Block 3,290.1 3,404.9 3,358.9 3,333.7

Capital WIP 98.3 95.7 114.8 137.8

Intangibles 115.4 148.9 119.1 95.3

Total Fixed Assets 3,388.4 3,500.6 3,473.7 3,471.5

Investments 543.8 396.0 415.8 436.6

Inventory 1,920.5 2,382.8 2,304.9 2,595.4

Debtors 768.2 813.9 864.3 973.3

Loans and Advances 704.8 584.7 643.1 707.5

Other Current Assets 498.8 564.4 620.8 651.8

Cash 60.9 53.9 68.6 77.4

Total Current Assets 3,953.2 4,399.6 4,501.8 5,005.4

Trade Payables 1,214.2 1,478.8 1,402.7 1,510.9

Provisions 58.8 64.5 74.2 77.9

Other Current Liabilities 330.8 360.2 396.3 435.9

Total Current Liabilities 1,603.7 1,903.6 1,873.1 2,024.7

Net Current Assets 2,349.5 2,496.1 2,628.7 2,980.8

Application of Funds 6,396.8 6,541.1 6,637.3 6,984.2


Key ratios


Per share data (|)

EPS 12.3 12.4 14.0 19.2

Cash EPS 21.6 23.9 26.5 32.6

BV 102.5 138.1 145.8 163.0

DPS 0.0 0.0 0.0 0.0

Cash Per Share 2.4 2.1 2.7 3.0

Operating Ratios

EBITDA Margin (%) 11.9 10.2 9.7 10.2

PBT Margin (%) 5.4 4.5 4.6 5.6

PAT Margin (%) 3.9 3.4 3.4 4.2

Inventory days 87.5 94.2 80.0 80.0

Debtor days 35.0 32.2 30.0 30.0

Creditor days 55.3 58.4 48.7 46.6

Return Ratios (%)

RoE 11.9 9.0 9.6 11.8

RoCE 11.0 9.9 10.5 12.3

RoIC 12.3 10.8 11.5 13.6

Valuation Ratios (x)

P/E 31.8 31.4 27.8 20.3

EV / EBITDA 14.5 13.8 12.7 10.6

EV / Net Sales 1.7 1.4 1.2 1.1

Market Cap / Sales 1.3 1.1 1.0 0.8

Price to Book Value 2.7 2.0 0.9 0.8

Solvency Ratios

Debt/EBITDA 4.0 3.1 2.8 2.3

Debt / Equity 1.4 0.8 0.8 0.7

Current Ratio 2.4 2.3 2.4 2.4

Quick Ratio 1.2 1.0 1.1 1.2



ICICIdirect.com coverage universe (Retail & Textile)

CMP M Cap

(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

Kewal Kiran Clothing 1674 1684 Hold 2127 55.1 69.2 59.0 30.8 24.6 28.8 20.2 20.8 22.9 30.5 23.8 20.7 22.7 23.8 19.5

Page Industries

(PAGIND)

16400 12500 Sell 18808 208.5 238.7 296.6 78.7 68.7 55.3 42.6 38.8 31.0 61.0 53.0 59.1 46.0 40.0 44.5

Rupa & Company 473 425 Buy 3906 8.3 9.1 12.0 57.1 52.1 39.3 23.7 22.1 18.1 22.9 23.6 25.3 17.9 16.4 19.2

Vardhman Textiles 1200 1240 Hold 6890 100.9 179.0 107.6 13.0 7.3 12.2 8.3 7.3 6.9 14.1 14.5 14.3 15.4 23.0 13.1

Arvind Ltd 390 480 Buy 9431 21.6 23.9 26.5 14.5 13.8 12.7 1.7 1.4 1.2 12.3 10.8 11.5 11.0 9.9 10.5

RoCE (%) RoE (%)

Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

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