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

That explains why stock is down today. Investors are still worried about growth coming. Stock is at high pe of 38.37. Is it safe stock? Looks risky.

 

It is not a stock which offers any meaningful margin of safety in the short and mid term. But if you believe and buy the growth story over the next few years, it is an interesting bet if one is careful on buying. Certainly not a buy and forget stock.

 

65 percent of annual profits have come in H2 traditionally for Kitex. Keeping that as a yardstick, FY 16 should close with 123 Cr Net profit which is a 25 per cent growth. EPS could be around INR 27. If multiples hold, we are looking at around INR 1026 around March 16. Caveats are the next quarter is make or break and multiples should hold.

 

Page industry is doing very well and it is visible .Only issue on that is growth on increased higher base . So in page , risk is tapering of growth.But Kitex resluts ,I realy wonder .So much profit margin in textiles?

 

Kharb, is your feeling that Kitex management is reporting false numbers? This has been a concern I have heard from one more person as well. He says there is something fishy about the numbers. Can you elaborate your concerns if that is your feeling ?

 

Dear Fundamentalist, I realy don't have any clue about Kitex numbers.But as I know lot about textile industry and it is a very competitive industry.I am just wondering about their dream numbers?But it may also be a case of some unique business I am totally unaware?A textile business at 16 time book value?

 

Hmmm. There is actually another major "fear" in this persons mind - why does it have INR 200 crores in cash and cash balance? That's an awful lot of money lying around.

Today stock is down since I bought a small position yesterday. My take is this year EPS should end at INR 25 ( lower estimate) if I apply a reduced multiple of 35, then share should be at INR 945.

The next massive trigger will be doubling of capacities. Shares like these do not show a smooth linear growth, there is a lumpy growth when it catches up and more.

 

Hey Folks. I am from the place where kitex company is based. Around 7 years back, when i started investing in 2008 (studying in college), this stock was a penny stock at around 8rs. And now it has grown up like anything which i still feel difficult to assimilate - A bus which i missed.
Even MRF was around 8000 & now 42000. Just 2 stocks which i remember very much.
At that time i was playing with stocks like unitech, jp associates, suzlon, Hind const. South ind bank, Philip carbide etc. All this trading saga came to end after i burned hands in the great (??)- kingfisher airlines (lost all pocket money on this). At that time broker firm used to buy stocks for me. He recommended KFA.

Now re entered market in 2014 & using online trading platform Apps which are very useful & gives easy access to market. So far things are going good.
Even though my comments does not add value to the topic - "Kitex overvalued or not" I just felt sharing this with you all.
Thanks all. Play safe.

 

Good of you to share your experience. There is NOT ONE person who has not lost money on the stock market ( unless as a principle he doesnt deal in equities).

Important is the lessons learnt and steps taken to avoid repeating the same mistake ( this usually is the difficult part )

 

Thank you. So what are the impressions of Kitex of the local community there?

 

Is MRF also from the same area? I mean, same city as which Kitex is from?

 

Are you based around tirupur? Infact then you should know good but still not so well known textile companies

Any suggestions?

 

Hi all. I am from Cochin,kerala where Kitex head office is located. MRF is also run by manorama group. Which is from Kerala.

 

Thank you. I did know both were from Kerala. I just thought I'd both came from the same city as well, there might be something about ecosystem there.

 

There is a material development which can significantly impact the Kitex Business model :

The Trans Pacific Trade Agreement has been ratified by member countries and there is an implication in this for the textile business.

There is a rule called the Yarn Forward Rule. As per this, in order to escape import duty in the US ( anywhere between 19 - 34%) the yarn or the fabric of the finished item must be sourced from a member country. India is not a part of the TPP. Vietnam, for example, can export their finished garment at zero duty but their yarn and fabric production is low and is dependent on imports. Member countries will start their own yarn and fabric over time.

I don't know what Kitexs current sourcing policy is , but this is a serious development which all Kitex Shareholders , indeed textile sector shareholders, should take note of and understand well with respect to their stocks

Any insight on this matter will be very helpful.

 

@Fun_Da_Mentalist - or other fans of Kitex stock-Any comment now.But Vardhman Textiles is among Forbes 20 recommendation.

 

Kitex at 52 week low..

 

Looks like DABBA stock. CFO resignation and missing cash of 200cr is BIG WORRY for investors. Sad story with big loss

 

But no body listen ,when some one warn with past such experinces,but people want first hand self experince in failure with losses, but not ready to listen from other costly similar experinces of past .People belive in father of duds making sexy stories , working in tandom with permoters with cooked no.I am not saying these comments specifically to any company but a popular game during boom. Those who don't learn from history are condemned to repeat

 

Some time hype over shadow logics,then answers are given by such compnies themselves in future.