From ~93% decline in revenue in Q1FY21, the company witnessed a sharp recovery in sales with de-growth being restricted to only 7% in Q3FY21. On a sequential basis, revenue grew 75% to Rs. 118.0 crore in Q3FY21 on account of improved festive demand. Change in channel mix (sales mainly through online and LFS) and higher discounting translated in gross margins contracting significantly by 1160 bps YoY at 36.8%. However, significant curtailment of operating overheads (employee and selling expenses down by 26% YoY and 70% YoY, respectively) led to EBITDA margins improving marginally by 80 bps YoY to 11.4%, with EBITDA remaining constant YoY at Rs. 13.5 crore. Lower other income (down 17% YoY) led PAT to decline 6% YoY to Rs. 10.8 crore. The company continues to be net cash positive, with cash and investments worth Rs. 257 crore as on Q3FY21 and has declared interim dividend of Rs. 8/share (Rs. 23/share in YTDFY21).
Valuation and Outlook
On the balance sheet front, the company utilised existing inventory and significantly reduced fresh buys leading to gross working capital release of ~Rs. 80 crore as on YTDFY21. Subsequently, the company paid off creditors and reduced debt worth ~Rs. 53 crore (borrowings as on December 31 was at Rs. 35 crore). KKCL has been conservative in its approach and has always given more prominence to balance sheet strength. The company has virtually debt free status (D/E: 0.1x) with cash and investments worth Rs. 257 crore. We roll our estimates to FY23E and bake in earnings CAGR of 5% in FY20-23E. We believe steady generation of operating cashflows and lower capex requirements would lead to consistent dividend payout ratio of ~65%+. We maintain HOLD rating on the stock with a revised target price of Rs. 960 (14x FY23E EPS, previous target price: Rs. 755).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_KewalKiran_CoUpdate_Jan21.pdf
Shares of KEWAL KIRAN CLOTHING LTD. was last trading in BSE at Rs.910 as compared to the previous close of Rs. 896.05. The total number of shares traded during the day was 303 in over 82 trades.
The stock hit an intraday high of Rs. 940 and intraday low of 863.9. The net turnover during the day was Rs. 268140.