Kewal Kiran Clothing Limited - ICRA

FY10a
FY11a
FY12e
FY13e
FY14e
FY10a
FY11a
FY12e
FY13e
FY14e
Rs Crore
Rs Crore
FY09a
FY10a
FY11a
FY12e
FY13e
FY14e
FY09a
FY10a
FY11a
FY12e
FY13e
FY14e
Rs Crore
Rs Crore
ICRA Equity Research Service
Kewal Kiran Clothing Limited
FINANCIAL OUTLOOK
Healthy revenue growth visibility through higher sales volumes and increasing realizations
We expect KKCL to remain a leading branded apparel manufacturer with a strong retail presence across the country
through a mix of own stores, franchisee stores, national chain stores and multi-brand outlets. We expect KKCL’s sales
to increase from ~3.36 million pieces in FY11 to ~5.55 million pieces by FY14e, resulting in a healthy 18% CAGR
volume growth. While the realizations are expected to increase by ~10% in FY12e due to the increase in excise duties
on branded apparels, we have assumed 5% CAGR increase in realizations thereafter.
6
5
4
3
2
1
0
15%
2.36 2.72
23% 30%
20% 20% 25%
15% 20%
15%
10%
5.55
5%
4.82
0%
4.03
3.36
-5%
-10%
-15%
-20%
900
800
700
600
500
400
300
200
100
0
8% 5% 7%
10% 5%
5%
608 639 685 750 787 827
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Apparels in Mns Growth %
Realization Rs/Pc Growth %
Source: Company, ICRA Equity Research Service
Strong revenue growth expected in-line with the industry; increasing contribution from value brands & low
margin products could moderate margins
Overall, we expect the company to report a strong 27% CAGR in net sales over the next three years in line with the
strong industry growth rates and KKCL’s established position in branded apparels in India. However, increasing
contribution from value and mass market brands like Integriti (which has ~2.8x MRP to prime cost ratio vs. ~3.0
times for Lawman Pg3 and ~3.5 times for Killer brand) and lower margin products like trouser, shirts and T-shirts
(due to lower scope for designing than in denim jeans) are expected to moderate the EBITDA margins by ~450 bps
(from ~29.1% in FY11 to ~24.6% in FY14e). However, relatively low depreciation and interest costs, on account of
asset light business model followed by the company, is expected to reduce the impact on net profit margins, which are
expected to contract by ~340 bps (from 19.6% in FY11 to 16.2% in FY14e) over the next three years.
600
500
400
300
200
100
0
KKCL's Consolidated Revenue Growth
21%
176
34% 33% 27% 22%
236
315
400
486
40.0%
30.0%
20.0%
10.0%
0.0%
150
100
50
0
KKCL's Trend in Profitability Margins
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Operating Income (OI) Growth Rate (%)
EBITDA
EBITDA Margin (RHS)
PAT
PAT Margin (RHS)
Source: Company, ICRA Equity Research Service
16