I have some doubts about BKT:
If there is any change in duty structure in US or UK, how can BKT cope with it (as there is already duty applied on Chinese tyre players exporting to US).
What will be the effect of rising rubber prices on BKT as it is very difficult to pass the price rise to OEMs.
Thanks.
While waiting for dollar to reach 67, have they lost any interest amount ? Is it accounted for ? What is the current interest rate earned on the dollar deposits and what could have been the interest rate if it was in rupee deposits ? where is the amount in P&L a/c ?
From what I understand the provisions of the TPP are clear. Duty in the US for nations exporting garments to it, using yarn and fabric from outside the signatory countries will be anywhere from 18 to 38%. Management tried to convey the impression that this duty was applicable to general garments but not special garments like kidswear. Again, it was not clearly stated. It was suggestive, it played around with words. and left an impression without actually saying it.
Speak with him again?
Essentially my takeaway was this - The future guidance for upto FY 19 is around a 20% CAGR on top lines and a 24 - 25% CAGR on Net Margins. This for a company trading at a multiple of 35. PEG is 1.4. Keep in mind this guidance is from a management which is historically aggressive on guidances, more so for the mid and long term which it corrects downwards as it comes closer to actual delivery date, so to speak. Over and above this is the overhang from listing and merging KCL. It is not so clear to me that there is such a clear client segregation between KCL and KGL. Am I wrong in saying this ? How then will business be separated. The answer again was extremely unclear, evasive and had a waffle like quality to it. At best , I now classify Kitex as an overpriced compounder with Corp Governance issues. I will be looking to reduce my position in line with what I allocate to compounders in my portfolio.
You are right. I think Kitex may not have answer for that. It's a treaty between the nations, to be addressed by nation heads. At most what they can do is to represent to government the implications of these treaty and how it's going to be addressed by GOI. is any possibility to address this by a company?
or have I not understood it properly?
This had me laugh out. No offence meant. A textile company waiting for 67 INR to convert the forex holdings? What if it appreciates to 64? This may be an intelligent decision by forex desk at the company but not a wise decision in the larger interests of the company. What if such decision making percolates to other areas of business decisions?
I'm not invested in Kitex so take my opinion as that of an outsider's.
Just to add my observation on company's foray into branded wear in the US. I'm sorry, but branded companies whack their brains out to gain customer's mindshare in US. Adidas tried, tried and tried but could not move an inch out of Nike's market share. May be an extreme example here. Same piece of clothing sold by GAP but made by a Bangladeshi exporter will sell out easily compared to this Bangladeshi company coming out with its own proprietary brand. Brand building is exorbitantly costly affair. Less expensive means - very long gestation period to build customer loyalty.
Rather than this, company could have expended efforts in widening the current customer base, mining current customers, innovate in the product lines and more.
The answer regarding TPP was evasive. While the question was on the duty impact if TPP was implemented, the focus of the answer was on the quality and scale of his production. This aspect was not explored in the detail it deserved by the people who had the chance to ask questions.
This point raised red flag...why is promoter waiting for 67?... I mean why are they speculating on forex rather than focussing on core business. Also, the saving between 67 and 65 exchange rate is just 3-4% and they are paying interest on debt of c.9%...net-net it is loss for company...
Are they in the business of textile or currency trading?