Kitex Garments - Does stated future growth justify its high valuations?

Very good analysis big difference between two Company

 

Thank You very much brother

 

Thank you Srouta. You are welcome Rama Murthy.

 

Dear Fundamentalist _Congratulation and Great analysis. I ilke that.But pl allow me to remain with my opinion .Strange but it happens only in stock market.

 

Thank you. Of course Kharb.

 

Kitex garments
1. kitex pramoter have one more co called Kitex Childrenswear which produce 2.5 lakh units per day kitex garment produce 5.5 lakh units per day and there is joint marketing kitex usa llc which supply there garments to
Toys R
Us, 20%.....Jockey, 20%..............Mothercare 20%...........Carters, 15.........Gerber, 25.
profit from this biz is disstributed equaly 50/50% to kitex garment and Kitex Childrenswear ...
Kitex Childrenswear is not listed .....

 

differance in Kitex garment (5.5 lakh units) and Kitex Childrenswear(2.5 lakh units) quantity managment says we " we have invested same amount in both company.after merger promoter stake will zoom. so be carefull....

 

kitex is not a brand....they are supplier to brand owner. brand ownercan switch to other supplier also.
this are brands....
Toys R
Us, 20% Jockey, 20% Mothercare 20% Carters, 15 Gerber, 25.

 

I would like to invest in those componies in which profit of company can take care of their growth. If some company declare huge jump in profit quarter over quarter, where is need of QIP and dilute equity. Company can grow on taking some debt and can service it easily. So why need of QIP after declaring super profit and dilution.A highly profitable company raising equity in market does not apeal me.A garment company is a highly labour intensive and very very less Capital intensive.These are my personal views and nothing company specific.

 

Dear Sirs, I think, a fine thread in progress ..... ! Surely Healthy ..... I feel

 

The main reason behind such a high valuations is kitex's operating profit margins and net profit margin.
While all other textile players typically have OPM of around 15-20%, kitex enjoys 35%+ OPM.
Also, an enduring moat is there for kitex garments, children wear clothes have to pass through quality checks and also they must be durable. Kitex is good at both. Also it supplies to world's giants like walmart, mothercare. Recent tie up with lamaze to open boost of opportunities. They are registering their own brand, that will again expands margin. Also they have plans to double capacity in next 3 years, they can also become world's no. 1 infact clothers manufacturer. This tag itself have some premium.

 

Abhisavengrow - I agree with you it is an outstanding business. Having said that, would you buy it now at these valuations? If so, what gives you the confidence about its growth sustaining at 30 % levels? At these valuations, the scope for getting away with a poor quarter is rather limited

 

hi there,
going for kitex depends on how much money and tenure you have. no doubt it is good stock but question why you should invest in textile segment that to high valued one. Textile segment is just another bubble which can burst any time recent trend just shows that. ex: @nandam , himatseingha . Find a stock with niche segment one with good managment and can give you 50% return from now.

 

@uppu

Since you seem to be negating stocks and segments, why dont you list the segments and individual stocks you prefer or are convinced about

Pls be specific

Thanks

 

Hi Sachin,

I look for stocks in niche segment with very few players and are affordable like axiscades and there are many more.. such stocks even though they fall it will always rise This stocks have even survived the recent market fall. Look for such kind. It is just an example you will have your opinion follow yourself!

 

Thank you Uppu. Here are the issues not clear to me in your post:

1. Why do you say textiles is a bubble?

2. Your advice is to find a niche player with good management. Kitex meets both requirements to a T.

The company focuses on garments for infants and is one of 14 firms worldwide who have the scale to supply to global leaders.

The quality of its management is reflected in its long history of growth and brilliant financial ratios.

So I am sure I am missing something that you are hinting at. Could you be company specific in your arguments against Kitex?

While I am tracking Kitex really closely I think I am not ready to pay a 40 multiple especially since the PE explosion is recent and earnings have to catch up. It might, based on past records. If not there is a fall of around 30 % around the corner which gives me the entry I am looking for.

I would like to hear your stock specific arguments against it so it can be more helpful.

 

Dear

Dear Uppu.Narayan, which are other many more you are referring.?

 

Kitex q2 results are rock solid. Net profit of 27 crores vs 19.3 crores same quarter last year, reflecting 40 percent growth. Normally q3 and q4 results are more solid than q1 and q2. I reiterate my position that this stock merits close attention. As of today I am starting to buy positions in this share

 

Why stock has not reacted? I was expecting UC and stock is down???? Unusual! GATI is also down over poor result

 

I think now the pressure is to check if they can deliver the full year projected revenue of INR 650 crores. Also, the net profit increase had come from superior cost control not significant top line growth.

H1 revenue is INR 243 crores. Guidance FY is INR 650 crores. H2 has to deliver INR 407 crores when full year numbers March 15 were INR 511. So there is still skepticism on full year numbers vs guidance.