ICICI Direct has given Buy recommendation for KPR Mill with a target price of Rs. 1620 in its research report issued on May 01, 2021
ICICI Direct’s research report on KPR Mill
KPR Mill continued to witness encouraging demand across all its segments in Q4FY21. Revenue for the quarter grew 28% YoY (20% QoQ) to Rs 1117.9 crore, with textile division (80% of sales) posting 26% YoY (12% QoQ) growth, sales from sugar division inching up 50% YoY (81% QoQ). On the back of healthy order book, sustained demand for casualwear products (where KPR’s expertise lies), garment volumes jumped 12% YoY to 29.7 million (mn) pieces. However, realisations were lower at Rs 127/piece (average realisations: Rs 150-160) on the back of unaccounted export incentive (~4-5%). KPR is awaiting clarity on the new RoDTEP incentive and will be accounting for it in subsequent quarters retrospectively. Export order book at the end of Q3FY21 was healthy at Rs 575 crore. Demand for cotton yarn globally in the past few months has been pretty robust, translating into significant rise in yarn realisation. Revenue from yarn & fabric division grew robustly by 42% YoY to Rs 496 crore driven by 22% realisation growth, 17% volume growth. EBITDA margins for the quarter expanded substantially by 810 bps YoY to 24% with absolute EBITDA growth of 94% YoY (6% QoQ) to Rs 267.5 crore. KPR has two major capex projects in the pipeline worth Rs 750 crore towards garmenting facility (Rs 250 crore), ethanol facility (Rs 500 crore).
We reiterate BUY and value it at Rs 1620 i.e. 16x FY23E EPS (1x PEG, earlier TP: Rs 1200).