Kitex Garments Ltd - Rating BUY

At CMP of Rs.546.25, KGL is trading at 14.2x its FY16E EPS of Rs.38.3 which is at an attractive valuation (PEG of 0.3x only). With 25% sales CAGR (FY15E- FY18E), debt free status by FY18E, strong margin improvement (1000 basis points by FY18E) with sales from its own brand and licensing of private labels and strong return ratios (50% plus roe and 40% ROCE), We expect stock to trade at 20x its FY16E EPS of Rs.38.3. We assign a BUY rating on the stock with a price target of Rs.766 in next 12 months which is more than 40% upside from current levels.


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