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Q3FY21 Company Update - KPR Mill - ICICI Direct

Posted On: 2021-02-08 20:10:49 (Time Zone: Arizona, USA)

KPR Mill reported yet another robust quarter driven by strong demand for textile products. Revenue in Q3FY21 grew 21% YoY to Rs. 929.6 crore, with textile division (87% of sales) posting 19% YoY growth and sales from sugar division inching up 67% YoY. On the back of healthy order book & sustained demand for casualwear products (where KPR's expertise lies), garment volumes jumped 12% YoY to 22.6 million pieces. Average realisation/piece also firmed up 9% to 163/piece, translating to value growth of 22% YoY to Rs. 369 crore (40% of sales). The export order book at the end of Q3FY21 was healthy at Rs. 600 crore. Demand for cotton yarn and fabrics globally over the past few months has been strong. Revenue from yarn & fabric division (44% of sales) grew 16% YoY to Rs. 412 crore. Gross margins expanded significantly by 707 bps YoY to ~50% on account of favourable spreads and advantage of being vertically integrated. Furthermore, owing to positive operating leverage, EBITDA margins came in at an all-time high of 27% (up 920 bps YoY/ 690 bps QoQ) in Q3FY21. On the back of robust operational performance, PBT grew 1.2x YoY to Rs. 218.2 crore. Owing to higher tax rate (28% vs. 6% YoY), PAT growth was restricted to 66% YoY to Rs. 156.3 crore (up 87% QoQ). KPR has two major capex projects in the pipeline worth Rs. 750 crore towards garmenting facility (Rs. 250 crore) and ethanol facility (Rs. 500 crore). Both projects are expected to come on stream by FY22E.

Valuation & Outlook

As on Q3FY21, KPR has outstanding debt worth Rs. 556 crore (D/E: 0.2x) and cash balance worth Rs. 350 crore. Recently announced capex plans are expected to increase debt from current levels but both projects are covered under schemes (garmenting covered under TUFS and 50% interest subsidy for ethanol capacity). Also, the new capacities will be coming up under a new subsidiary company that will be eligible for lower tax rate of ~15%. Driven by new capacity additions, we expect revenue, earnings to grow at CAGR of 19%, 20%, respectively, in FY21-23E. Capital deployment towards value accretive projects (targeted RoCE: garmenting: 30%, ethanol: 22%) augurs well for KPR. We anticipate RoCE will gradually get enhanced to 24% by FY23E. We maintain BUY rating on the stock with a revised target price of Rs. 1200 (13x FY23E EPS, previous TP: Rs. 1100).

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Shares of K.P.R. Mill Limited was last trading in BSE at Rs.931.4 as compared to the previous close of Rs. 921.95. The total number of shares traded during the day was 5863 in over 633 trades.

The stock hit an intraday high of Rs. 942 and intraday low of 926. The net turnover during the day was Rs. 5488771.

Source: Equity Bulls

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